Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

ESSO PETROLEUM COMPANY BILL

Mr. John Arbuthnot, Mr. Mawby, Mr. Oram, Sir Leslie Plummer, and Mr. Leslie Thomas nominated Members of the Select Committee.—[Mr. E. Wakefield.]

Oral Answers to Questions — EMPLOYMENT

Scotland

Mr. Dempsey: asked the Minister of Labour how many persons were registered for employment in Scotland at the latest date for which figures are available; and what steps he proposes to take to ensure that they will be offered suitable employment in the near future.

The Minister of Labour (Mr. Edward Heath): The Answer is 69,543 on 13th June. My local officers will continue to do all they can to find suitable vacancies for them.

Mr. Dempsey: Does not the right hon. Gentleman realise that Scotland requires something more than generalities? Will not he consult his right hon. Friends and precisely plan the development of employment opportunities in Scotland so that the 69,500 people who are unemployed can look forward to having a job in the very near future?

Mr. Heath: The Government are doing everything they can to persuade industry to go to development districts, and these cover 77·4 per cent. of those who are unemployed in Scotland.

Mr. Dempsey: asked the Minister of Labour how many children left school in Scotland in 1959, and what number failed to find employment; how many are estimated to leave school in 1962;

and, on the basis of present employment prospects, how many are likely to be placed in employment.

The Parliamentary Secretary to the Ministry of Labour (Mr. Peter Thomas): Out of approximately 62,000 school leavers, 152 who left in the summer and Christmas terms in 1959 were still awaiting employment on 13th June. No figure is available for those who left in the spring term. Some 81,000 will seek work in 1962 and their prospects will depend on the general employment outlook, which, I am glad to say, has lately improved significantly in Scotland.

Mr. Dempsey: Does not the Parliamentary Secretary realise that that Answer is not good enough for the people of Scotland? It is a well-known fact that one authority alone is likely to have 5,000 girls and boys unemployed in 1962. Will not he try to give us exact details of the serious nature of the problem so that we will be able to make every effort to provide employment prospects for school leavers?

Mr. Thomas: The Question which the hon. Member asked was how many children left school in 1959 and what number failed to get employment. I gave him the exact figures. He also asked how many it is estimated will leave school in 1962, and I gave him an estimate. He will appreciate that there has been a considerable improvement concerning children over the last year—an increase in vacancies and a decrease in unemployment. The number of vacancies for girls exceeds the number of girls who are unemployed by six times.

Mr. Lee: Is it not the case that the Government's present economic policies will result in the creation of unemployment—[HON. MEMBERS; "Why?"]— because credit squeezes and 6 per cent. Bank Rates generally have that effect. Therefore, the Ministry of Labour must have serious representations to make to the Chancellor of the Exchequer concerning the opportunities which will arise during the next two years when the bulge will create a very great problem.

Mr. Thomas: I certainly would not agree with the hon. Member's forecast about the result of the Government's economic policy.

Ex-Apprentices, Machine Tool Industry (Call-up)

Mr. Swingler: asked the Minister of Labour (1) what reply he will make to the letter to his Department of 23rd June from Newcast Foundries, Silverdale, Newcastle-under-Lyme, concerning the granting of deferment of call-up to ex-apprentices in the machine tool industry and allied industries;

(2) why his Department is granting deferments beyond the end of apprenticeships to workers of certain firms in, or supplying, the machine tool industry, and not to workers of others, in cases where the circumstances of shortage of skilled labour are similar.

Mr. Heath: A small number of ex-apprentices engaged on engineering work of special importance to the export trade, or connected with important defence projects, have been granted extended deferment. Letters have been sent to the firm mentioned by the hon. Member confirming that their ex-apprentices do not qualify under these limited arrangements.

Mr. Swingler: Is it not clear that Newcast Foundries, in its letter to the right hon. Gentleman's Department, proved that his Department has been granting block deferments for skilled men in certain firms in the machine tool trade and not to others? This cannot be due to the question of exports, because this firm is supplying certain parts to firms for the purpose of making machine tools for export. All these men are involved in the export trade and their skill is vitally required to maintain production.

Mr. Heath: That is not the case. I have read these letters very carefully. The deferments which have been granted have been to firms in the categories I have mentioned in my reply. This firm does not come into those categories. It is a supplier for the machine tool industry, but is not in the machine tool industry itself. The system is well-known and it has been explained to the firm, namely, that a firm requiring exemption of this kind has to be sponsored by a Government Department. This firm is not sponsored by a Government Department and therefore does not qualify. I hope that it will no longer

labour under the misapprehension that it is receiving unfair treatment.

Mr. Swingler: Does not the right hon. Gentleman realise that this firm, which, I agree is very small, is supplying firms for the purpose of export orders? While it is perfectly true that it is not itself involved in the export trade, the loss of skilled labour to it means a drag on the firms which it is supplying and they cannot comply with their delivery dates for export orders.

Mr. Heath: Yes, but, because firms qualify for exemption because of their own products, it does not necessarily mean that all their suppliers qualify as well. What I have to have is a sponsorship from another Government Department showing that supplies would be affected because of limitations of suppliers if I did not grant these deferments, and that has not been forthcoming.

Sunderland

Mr. Willey: asked the Minister of Labour what was the number of unemployed in Sunderland at the latest available date; and what were the corresponding figures for 1959 and 1958.

Mr. Heath: There were 4,780 at 13th June, 1960, 4,401 at 15th June, 1959, and 2,818 at 16th June, 1958.

Mr. Willey: We welcome the fall in unemployment over the past few months, but does the Minister realise that, if we compare the position over the last two or three years with what is happening now, we find that the employment position is very seriously deteriorating in Sunderland? Further, is he aware that we feel that we are being sadly neglected by the Government, in spite of the right hon. Gentleman's visit to Sunderland? When shall we have some signs that the Government are aware of the deteriorating situation?

Mr. Heath: The situation has been deteriorating overall for reasons which are well known to the hon. Gentleman, namely, the particular difficulties of the shipbuilding, ship repairing, and construction industries. The sign of the Government's interest surely is that the area is a development district, and, at the moment, from the various sources available, there are 639 jobs in the pipeline.

Mr. Willey: Will the Minister have a word with the Minister of Transport so that we may have a vigorous, active and positive approach to shipbuilding before matters become much worse?

Mr. Heath: I am sure that my right hon. Friend will have noted the hon. Gentleman's remarks, but he is fully aware of the position of the shipbuilding industry.

Disabled Persons, Sunderland

Mr. Willey: asked the Minister of Labour how many disabled persons registered on the disabled persons register in Sunderland are at present unemployed.

Mr. P. Thomas: Five hundred and two on 20th June.

Mr. Willey: I recognise that Remploy is considering extending the factory in Sunderland, but will the Parliamentary Secretary recognise that this can play an important part in relieving the heavy unemployment there is among the disabled, and will he do his best to give Remploy encouragement to enable it to proceed with those plans?

Mr. Thomas: I join with the hon. Gentleman in welcoming the consideration which is being given by Remploy to an extension of the factory in Sunderland.

Crook

Mr. Ainsley: asked the Minister of Labour what was the number of insured persons in the Crook Employment Exchange area in each of the last ten years; what is the present number; and what are the future employment prospects for the area.

Mr. Heath: As the answer to the first two parts of the Question consists of a number of figures, I will, with permission, circulate it in the OFFICIAL REPORT. Crook is part of a development district and my right hon. Friend the President of the Board of Trade is making continuous efforts to attract new industry there. A considerable number of additional jobs are already in prospect.

Mr. Ainsley: Is the Minister aware of the deep concern felt by the three local authorities in this area? Will he accept the figures which I have, namely, that, in

my conservative estimation, there has over that period been a migration of about 10,000 people from the area and at the moment there are more than 2,000 young people in secondary schools in my area but there is no work available there? Will he impress upon the Board of Trade the need to do something to stop the migration and keep the young people there?

Mr. Heath: I could not accept the figures which the hon. Gentleman has given without checking them. They were not the figures for which he asked in his Question and which I gave in my Answer. Generally, as regards migration, the best answer is that more industry should go to this area, and that is what my right hon. Friend is trying to bring about.

Following is the table:


ESTIMATED NUMBERS OF EMPLOYEES (EMPLOYED AND UNEMPLOYED EXCHANGE AT END-MAY OF EACH OF THE YEARS 1952 TO 1959


——
Males
Females
Total


1952
…
10,450
2,360
12,810


1953
…
10,400
2,280
12,680


1954
…
10,140
2,330
12,470


1955
…
10,000
2,410
12,410


1956
…
9,690
2,370
12,060


1957
…
9,580
2,280
11,860


1958
…
9,180
2,350
11,530


1959
…
8,900
2,390
11,290

Comparable figures are not available for any year before 1952.

Commercial Apprenticeship Scheme

Mr. Boyden: asked the Minister of Labour how many boys and girls, respectively, have been apprenticed through the commercial apprenticeship scheme; and what percentage this represents of the annual recruitment into commerce of juveniles in the age group concerned

Mr. P. Thomas: One hundred and seventy boys under 18 years of age have been apprenticed under the commercial apprenticeship scheme of the Association of British Chambers of Commerce from its inception in May, 1957, until 31st August, 1959. So far, no girls have been apprenticed. I cannot say what proportion this is of total recruitment into commerce as the figures do not distinguish commerce from clerical employment generally.

Mr. Boyden: Is not this figure pitifully small, and does not the Minister think that he should use his influence with the banks and the insurance companies, for example, which give practically no day-release, to get them to help in the scheme? Can he not take more energetic steps to do something about it?

Mr. Thomas: I agree that the figure appears to be small, but it must be appreciated that this scheme is not intended as a general training scheme for boys and girls entering commercial employment but is for the training of potential candidates for executive posts. It is some encouragement to know that it is expected that there will, this year, be an increase of about 50 per cent. in the numbers entering the scheme.

Ayrshire

Mr. Ross: asked the Minister of Labour how many registered unemployed in Ayrshire are in districts listed for aid under the Local Employment Act; and how many are in unlisted districts.

Mr. Heath: At 13th June, 1,722 in the development districts of Ayrshire and 2,220 in the rest of Ayrshire.

Mr. Ross: Will the Minister compare those figures with what he said in answer to a supplementary question by my hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey) when he said that virtually 75 per cent. of the unemployed in Scotland were in development districts, and will he appreciate that the development district has been drawn far too narrowly in Ayrshire and invite the Board of Trade to do something about that as well as trying to draw some industry into Ayrshire to improve the figures?

Mr. Heath: My Answer does not contradict the answer I gave the hon. Member for Coatbridge and Airdrie. As was constantly explained during the debates on the Bill when it was passing through the House, the policy is to concentrate development districts on the areas with densest unemployment, that is to say, where the need is greatest. In some cases, it will obviously happen that, over a larger area, there is a greater number of unemployed.

Mr. Lee: Does the right hon. Gentleman appreciate that when the Distribution of Industry Acts went out of

commission and the present Local Employment Act came in, my hon. Friends were very sceptical about the changes in the development areas then and we asked the Government to keep a careful watch on areas which were formerly development areas but which are not now scheduled? Will the Minister say, taking the old areas as a basis, what has been the effect now that they have been de-scheduled?

Mr. Heath: I could not answer that without notice. If the hon. Gentleman will put down a Question, I will gladly answer it. Of course, these areas are kept continually under review.

Mr. Ross: asked the Minister of Labour if he will state, for the latest available date, the number of unemployed in Ayrshire and Kilmarnock, respectively.

Mr. Heath: There were 3,942 in Ayrshire and 751 in Kilmarnock at 13th June.

Mr. Ross: Does the Minister realise that Ayrshire is a county of seaside resorts and the centre of the tourist industry, and that figures like those at this time of the year are really deplorable? Will he once again promise to see the President of the Board of Trade to get something done in this county?

Mr. Heath: Of course, my right hon. Friend will see the comments which the hon. Gentleman has made, but the figures have declined much more than seasonally this summer—529 in Ayrshire between May and June and 25 in Kilmarnock—and in Kilmarnock the percentage of 2·6 is, of course, lower than the average for Scotland as a whole, which is3·2 per cent.

Mr. Ross: Will the Minister accept that we in Ayrshire take a very dim view of the attitude of complacency on the part of the Government towards this problem? We still have 4,000 unemployed, whereas I doubt that we had 1,000 under the Labour Government.

Mr. Heath: There is absolutely no complacency in the Government. I am sure that the hon. Gentleman will be pleased to know that there are about 11,088 jobs expected to accrue in Ayrshire, of which 591 are in Kilmarnock.

Employers and Trade Unions (Consultation)

Mr. Lipton: asked the Minister of Labour if he will invite representatives of employers and trade unions to consider with him the human and industrial problems of the next five years.

Mr. Heath: I am, of course, in regular contact with representatives of employers and trade unions through the various advisory bodies concerned with special aspects of these problems. I am also frequently in touch with them in many other more informal ways.

Mr. Lipton: Is the Minister aware that in the 1959 election programme of the Conservative Party, in the section which was somewhat ironically entitled "Sharing Prosperity", a pledge was made to call such a conference as I have indicated in my Question? When will the right hon. Gentleman redeem the pledge, or will it be one of the many unredeemed pledges of this Administration?

Mr. Heath: This Administration is continually in process of redeeming its pledges. [HON. MEMBERS: "Oh"] That is why the hon. Member for Brixton (Mr. Lipton) is so upset. I am perfectly ready to enlarge consultation with both sides of the industry when a suitable opportunity occurs.

Ex-Regular Service Men (Resettlement Advisory Board)

Mr. Atkins: asked the Minister of Labour whether he will make a statement about his plans for the advisory board on the resettlement of ex-regular Service men.

Mr. Heath: The Advisory Board was appointed in July, 1957, for a two year period and re-appointed last year for a further twelve months. As the arrangements for resettlement are now operating smoothly, and ex-regulars are being readily accepted in commerce and industry, the special advice of the Board is no longer required. I have therefore decided, after consultation with the Chairman, that it should not be re-appointed. My Departmental machinery for assisting ex-Regulars will continue unchanged and the Resettlement Committees in Scotland, Wales and

the regions of England have been re-appointed.
I would like to thank Sir Frederic Hooper and the members of the Board for the time and effort which they have so willingly and successfully devoted to this work.

Mr. Atkins: Is my right hon. Friend aware that his expressions of gratitude to Sir Frederick Hooper will be widely shared throughout the House? Can he say whether this action will in any way affect the voluntary associations which help ex-Regulars into employment?

Mr. Heath: No, Sir. The relations with voluntary associations will remain exactly the same, and we shall continue our present close co-operation with them.

Oral Answers to Questions — ROYAL NAVY

H.M.S. "Jaguar" (Board of Inquiry)

Mr. Driberg: asked the Civil Lord of the Admiralty if he will make a statement on the findings of the court of inquiry into the damage to H.M.S. "Jaguar"; and if he will now estimate the approximate cost of the repairs.

The Civil Lord of the Admiralty (Mr. C. Ian Orr-Ewing): The Board of Inquiry found that shot blast grit was present in the lubricating oil system of the main engine which failed. The grit was, or had been, present in the main engines, probably before the acceptance trials. There is no question of sabotage 
The detailed investigations in hand have not yet produced enough evidence to enable us to define the exact scope of the repair work required. Any estimate quoted at the present time would therefore be unreliable.

Mr. Driberg: How soon will the Civil Lord be able to give an estimate? If he cannot give it by next Wednesday, which will be the last occasion on which he will be answering Questions before the Summer Recess, will he make a statement before the House rises, since a good deal of public money seems to have been wasted?

Mr. Orr-Ewing: I am certainly prepared to promote or encourage a Question at the right moment. I do not expect that it will be very long. As the


hon. Member will know, we have to take the engine down and meticulously examine every part of it, and that is a long process, before we can assess exactly what has to be done. In the meantime, this ship has been replaced by another ship in her class.

Mr. Steele: At what stage did this grit get into the oil? Can the hon. Gentleman give any indication of when it happened?

Mr. Orr-Ewing: I cannot go much further than I did in the original Answer. It very probably got in before the acceptance trials. We have not been able to pinpoint it more closely at present.

Mr. Steele: I understand, therefore, that the inquiries have shown that it was "probably" before the trials?

H.M.S. "Bulwark"

Mr. Wall: asked the Civil Lord of the Admiralty whether he will make a statement about the experience so far gained with H.M.S. "Bulwark" since her employment as a commando carrier.

Mr. C. Ian Orr-Ewing: Although it is early days, since H.M.S. "Bulwark" has been in commission as a commando carrier for only three months, first reports are promising. Trials show that she can successfully fill her primary rôle and that in an emergency she could transport a second commando of about 600 men. We have also had very good reports on the air-conditioning system and the excellent effect it has on the overall efficiency.

Mr. Wall: As the trials have proved a success, can my hon. Friend say when it is likely that a second commando carrier will be provided?

Mr. Orr-Ewing: H.M.S. "Albion" has been selected for this and preliminary work has already been authorised.

N.A.39 Aircraft (Operational Service)

Mr. Wall: asked the Civil Lord of the Admiralty when he expects the first N.A.39 Squadron to be in operational service.

Mr. C. Ian Orr-Ewing: It is not customary to disclose or forecast such information. I can say that the trials with

several aircraft of the development batch have been going very well.

Mr. Wall: Can my hon. Friend say how the sales of this outstanding aircraft to our foreign allies are proceeding?

Mr. Orr-Ewing: That is really a question for my right hon. Friend the Minister of Aviation, but my hon. Friend will know that it is part of Government policy under interdependence to try to interest N.A.T.O. and Commonwealth allies in now forms of armament in all the Services.

Mr. Steele: The hon. Gentleman so far has not been able to interest the R.A.F.

Naval Ratings (White Gloves)

Vice-Admiral Hughes Hallett: asked the Civil Lord of the Admiralty whether he is aware that the naval ratings who lined the streets on the occasion of the wedding of Her Royal Highness Princess Margaret were wearing white gloves; whether this is required by the uniform regulations; and on what occasions sailors must wear white gloves.

Mr. C. Ian Orr-Ewing: Yes, Sir. Wearing of white gloves is authorised for naval guards of honour at important ceremonial occasions in the United Kingdom between 1st October and 30th April. This instruction was issued last year in Admiralty Fleet Orders and is being incorporated in the next edition of the uniform regulations. The wearing of these gloves was extended as a special case to the naval street-lining parties on this occasion, as it was considered that they would look smarter.

Vice-Admiral Hughes Hallett: While I am sure that everyone will agree that, as ever, these men looked very smart indeed, may I ask my hon. Friend whether, nevertheless, he is aware that there are many people who do not regard the wearing of white cotton gloves by seamen as entirely appropriate? Can my hon. Friend at least give us an assurance that we shall not see anyone in tropical rig wearing long white cotton gloves?

Mr. Orr-Ewing: In answer to the first part of my hon. and gallant Friend's supplementary question, I would say that the Royal Marines have always worn


white gloves and so have other Services. Therefore, this brings the Royal Navy into line with the other Services. I think that the House generally will agree that these men looked smart. I certainly note the last point and I assure my hon. and gallant Friend that there is no question of lengthening this issue.

Mr. Shinwell: Are the gloves an Admiralty issue or a Government issue or were the ratings required to pay for them?

Mr. Orr-Ewing: They were an issue.

Captain Litchfield: Since when has it been the custom of the Royal Navy to follow the custom of the other Services?

Mr. Orr-Ewing: When the other Services happen on something which we believe is worth copying, we copy it, but generally they copy us.

Mr. Dugdale: In whose head did this curious little hit of whimsy emanate?

Gibraltar

Mr. Holland: asked the Civil Lord of the Admiralty what plans have been made for the Royal Navy to celebrate, on 24th July, the 256th anniversary of its victory at Gibraltar in the Western Mediterranean.

Mr. C. Ian Orr-Ewing: None, Sir.

Mr. Holland: Does my hon. Friend recall that this "impregnable" fortress was captured by a naval landing party of a detachment of the Royal Marines in an action which lasted less than four days? As this fortress of Gibraltar has been a valuable asset to the country ever since, does not my hon. Friend think that this occasion merits an annual order to the Fleet to splice the mainbrace?

Mr. Orr-Ewing: I will bear in mind what my hon. Friend has said and have a look at the matter.

Lower-Deck Structure (Committee's Report)

Mr. Willis: asked the Civil Lord of the Admiralty whether consideration of the Report of the Committee on Lower-Deck Structure has yet been completed.

Mr. C. Ian Orr-Ewing: No, Sir.

Mr. Willis: When will consideration of this Report be completed? The Admiralty has now had the Report far two years or more. Is it not really time that it finished its studies?

Mr. Orr-Ewing: I agree that we have had this Report for about two years. It raises a number of fundamental issues about the careers of all ratings and it would be wrong to come to a quick or indefinite decision before we have thoroughly considered all the implications both on the efficiency of the Navy and on the careers of the men affected.

Mr. Willis: When are we likely to learn the results of the consideration?

Mr. Orr-Ewing: I can only say that the Board of Admiralty is examining each facet of these recommendations. We are having a long discussion on them and we are trying to come to some proper conclusions which will benefit the Navy and the men.

Rosyth Dockyard (Assisted Travel Scheme)

Mr. W. Hamilton: asked the Civil Lord of the Admiralty what protests he has received concerning the threatened withdrawal of the assisted travel scheme at Rosyth Dockyard; and how soon he expects to come to a decision on the matter.

Mr. C. Ian Orr-Ewing: Apart from a memorandum sent to me by my hon. Friend the Member for Fife, East (Sir J. Henderson-Stewart) and the hon. Member for Fife, West (Mr. W. Hamilton), I have received no protest about this. I cannot say when the review of this scheme will be completed but we would give three months' notice of any change that we decided on.

Mr. Hamilton: Is the Minister aware that the trade unions concerned are very perturbed at the prospective withdrawal of this scheme, and that it will mean that many workers will be faced with a substantially increased outlay per week and that many of them, who travel very far, will probably have to give up their jobs? Is he aware that this is at a time when it is very difficult in Scotland to obtain an alternative job? Will he undertake to keep these considerations in mind before he gives a decision?

Mr. Orr-Ewing: We have always tried to make it clear that this form of travel aid is no part of wages and was not to be so considered. I understand what the hon. Member has said. We will certainly allow time for representations to be made before any changes are made. The men pay the first 6s. of their own travelling costs. After that, about 1,000 men receive 3s. or less a week assistance; another 1,000 receive between 3s. and 9s. a week assistance; and a further 500 receive between 9s. and 21s. a week assistance. We have also to bear in mind the interests of the taxpayers as well as the interests of others. I will certainly see that this matter is carefully considered before any decisions are reached.

N.A.T.O. Projects, Argyll

Mr. Lilley: asked the Civil Lord of the Admiralty whether he will now make a statement about further North Atlantic Treaty Organisation projects in Argyll.

Mr. C. Ian Orr-Ewing: After receiving competitive tenders the Admiralty has now awarded the main contract for the construction of a N.A.T.O. oil fuel depot at Loch Striven to Messrs. Melville Dundas and Whitson Ltd. of Glasgow. The work is expected to take two years to complete, and the cost to be about £2 million.

Mr. Lilley: While thanking my hon. Friend for that statement, which will give great pleasure, I am sure, to my hon. Friend the Member for Argyll (Mr. Noble), may I ask whether he is aware that this statement will be accepted by the building and civil engineering industries in Scotland as a most useful contribution, which they sorely need, to using plant and labour? Will he say whether this is additional work to that which is at present going on?

Mr. Orr-Ewing: I gladly confirm that this is in addition to the Glen Douglas scheme, which will cost £¾ million; to the Macrihanish scheme which will cost over £1 million; to the boom defences at Fairlie, which in total will be over £3 million; and to the Rosneath scheme, which is to cost £300,000.

Mr. Ross: Is the Minister sure that those figures are right? The Minister of Labour has just explained to me that when he told the House, in reply to my

supplementary question on Question No. 10, that there were 11,088 jobs in the pipeline, he meant 1,188 jobs.

Mr. Orr-Ewing: I was expecting a warm welcome of cheers from the other side of the House. Up to that time it seemed to me that they were most anxious to have more jobs in Scotland. I have now announced how this might come about.

Mr. Emrys Hughes: Will the Minister keep in mind that these jobs do not add to the economic plan for reconstructing the industries of Scotland, that they do not assist the recovery of essential industry in Scotland and that they are a waste of money on purely military and naval projects and will eventually lead to pools of unemployment?

Mr. Orr-Ewing: We believe in being loyal to our N.A.T.O. commitments. Some of these projects may have commercial as well as military advantages.

H.M.S. "Lion"

Commander Kerans: asked the Civil Lord of the Admiralty whether he will make a statement about the completion, this year, of H.M.S. "Lion".

Mr. C. Ian Orr-Ewing: H.M.S. "Lion" will be commissioned on 20th July, 1960, and accepted from the shipbuilder on 22nd July. She will be the second of the Tiger Class cruisers to be accepted into service. These ships, with their automatically controlled armament and other up-to-date equipment, long endurance and extra command facilities will be a most valuable addition to the strength of the Navy.

Commander Kerans: While thanking my hon. Friend for that reply, may I ask whether he can say when the third Tiger Class cruiser is due?

Mr. Orr-Ewing: I cannot. I think that it would be wrong at this stage to give a firm date. If my hon. and gallant Friend puts down a Question in due course, I shall be happy to try to answer it.

Royal William Victualling Yard, Devonport (Fire)

Miss Vickers: asked the Civil Lord of the Admiralty if he will make a statement in regard to the recent fire in the


Royal William Victualling Yard, Devonport.

Mr. C. Ian Orr-Ewing: On 1st July, a fire broke out on the second floor of the East Loft Bakery Block at the Royal William Yard, Devonport. The Dockyard Fire Brigade and the City of Plymouth Fire Brigade were called in and the fire was extinguished about four hours later. There were no casualties.
Investigations are still being carried out as to the cause of the fire.

Miss Vickers: While thanking my hon. Friend for that reply, may I ask him to remember that this is a very beautiful building by Sir John Rennie? I hope that he will find it possible to rebuild this section. Will he assure me that, in the meantime, while investigations are going on, no men will be dismissed?

Mr. Orr-Ewing: I am aware that this building has a very nice façade but until structural surveys have been completed it would be wrong to announce our future intentions about the building. I can assure my hon. Friend that no people will be dismissed as a result of this fire.

Sir J. Maitland: Will my hon. Friend tell me whether in this case normal fire insurance was carried?

Mr. Orr-Ewing: No. The Government Departments and Service Departments do not carry normal fire insurance. They carry their own risks.

Royal Dockyards (Working Week)

Miss Vickers: asked the Civil Lord of the Admiralty if he will make a statement on the introduction of the 42-hour week in Her Majesty's Dockyards.

Mr. C. Ian Orr-Ewing: As from 3rd July the conditioned weekly hours of industrial employees in Her Majesty's Dockyards at home have been reduced to forty-two.
We have received assurances from the trade unions of co-operation in every possible way to ensure that the shorter working week will lead to no loss of production and they have accepted a general obligation to assist in measures designed to increase efficiency.

Miss Vickers: While thanking my hon. Friend for that Answer, which I am sure will be very satisfactory to all concerned, may I ask whether it has been agreed that the breakfast break, which they used to get on arrival—between ten and thirty minutes of arrival—is a wartime anomaly and is to be stopped?

Mr. Orr-Ewing: Yes. We had a meeting of the Admiralty Industrial Council on this matter and the trade unions agreed that this was rather an old anomaly which should no longer exist. There will be other breaks during the day but not immediately after arrival.

Mr. Steele: Is the Minister aware that the Government have no reason to congratulate themselves on the long-drawn-out negotiations which took place before a decision was reached and that, particularly in a factory in my constituency, industrial relations have certainly not been assisted?

Mr. Orr-Ewing: This is probably not the right moment to start a long debate on the long-drawn-out negotiations in the J.I.C. and other councils, but there are two sides to the case. If the hon. Member is right in saying that labour relations have been roughened, I hope that this settlement, particularly in our own dockyards, will re-establish confidence in the Whitley Council and its workings.

Oral Answers to Questions — BRITISH ARMY

Microbiological Research Establishment, Porton

Mr. Frank Allaun: asked the Secretary of State for War what was the total expenditure last year on the Microbiological Research Establishment, Porton; how much was spent in developing or manufacturing cholera, typhus, diphtheria, parrot fever, dysentery, plague, and botulinus germs and viruses, respectively; and if he will stop any further preparation for germ warfare.

The Secretary of State for War (Mr. Christopher Soames): It would not be in the public interest to give the figures asked for. With regard to the future, I would refer the hon. Member to the answer of my right hon. Friend the


Minister of Defence on 23rd March this year, when Government policy in this respect was plainly stated.

Mr. Allaun: Is it public security which prevents an Answer or is it public revulsion? Will the Minister admit that such research has taken place and, secondly, that stocks of botulinus toxins have been built up?

Mr. Soames: Research is taking place constantly. I noticed a piece by the hon. Member in a periodical recently in which he said,
I confess that my blood ran cold as fact after fact
about germ warfare
was driven home
at meetings in the House of Commons. In view of that, I thought that he would be glad to know that steps were being taken to ensure that we keep abreast of movements in this field in order to be able to protect ourselves.

Recruitment

Mr. Shinwell: asked the Secretary of State for War if he will state the latest recruitment figures.

Mr. Soames: The figure for the Army for the month of May is 2,480 compared with 2,169 in April. Full details covering all three Services will be published this afternoon in the normal way.

Mr. Shinwell: Does not the right hon. Gentleman have any anxiety about the figures? Are they coming up to expectations? If not, what does he propose to do about it?

Mr. Soames: Projecting the recruiting figures forward to the end of 1962, we have no reason to alter the opinion of either myself or my right hon. Friend the Minister of Defence, which has been frequently stated in the House, that we will achieve an all-Regular Army of 165,000 in the early days of 1963.

Mr. Shinwell: Is not the right hon. Gentleman making assumptions which are not justifiable on the facts and figures? Are the recruiting figures coming up to expectations or are they below expectations? Surely it is upon the basis of those figures that we make our estimates.

Mr. Soames: This has been worked out on the basis of facts and figures and

not on the basis of assumptions and guesses as to what will happen in the next months or years.

Viscount Hinchingbrooke: Are our defence commitments fitted to recruiting figures or vice versa?

Mr. Soames: Recruiting figures of voluntary service must be regulated by the number of men who are prepared to come forward and join the Army.

Malkara Anti-Tank Rockets

Mr. Harold Davies: asked the Secretary of State for War what is the cost of the 500 Malkara anti-tank rockets ordered from Australia to equip the Royal Armoured Corps; and why this order was placed despite the fact that the weapon was cumbersome and already out of date.

Mr. Soames: Some 400 missiles have been ordered at a cost of about £1 million. Others will follow. Malkara is air-portable, accurate, highly lethal against the heaviest tank at considerable range, and is already in production. It will be a most valuable addition to our armoury.

Mr. Davies: Is the right hon. Gentleman aware that some of us know that there are always difficulties in ordering equipment like this? Can he explain why it is that Australia has abandoned this weapon because it is cumbersome and is not effective, while the British Government go ahead? Is it not time that somebody somewhere had a policy of building up our hardware instead of spending public money on equipment that is useless?

Mr. Soames: I wonder whether the hon. Gentleman knows the reasons why the Australians have not ordered this weapon. I must make it clear that it was developed in Australia on our behalf and to meet our needs. It was not developed to meet the needs of the Australian Army, which is concerned with the much more restrictive conditions of jungle warfare. I would have been very surprised if the Australians had decided to adopt this weapon, because it does not fit their needs.

Commander Kerans: Is my right hon. Friend aware that I saw this weapon last month when it was shown to many hon.


Members? I found it to be extremely effective for both moving and stationary targets at varying ranges.

Mr. Soames: I am grateful to my hon. and gallant Friend for those comments. I wish the hon. Member for Leek (Mr. Harold Davies) had been able to see it for himself.

Mr. Steele: How many of our N.A.T.O. allies have accepted this weapon and are prepared to buy it?

Mr. Soames: It has not been sold to any other N.A.T.O. countries at present.

Oral Answers to Questions — POST OFFICE

Postal Franking Machines (Advertisements)

Mr. Janner: asked the Postmaster-General if he will prohibit the use of officially-approved postal franking machines for printing advertisements encouraging drinking before driving an example of which has been sent to him by the hon. Member for Leicester, North-West.

The Assistant Postmaster-General (Miss Mervyn Pike): As my right hon. Friend informed the hon. Member the particular slogan to which he refers was intended to advertise a book. Unfortunately, it was clearly liable to misinterpretation, and as soon as it came to notice it was withdrawn under longstanding arrangements which are designed to preclude the sort of advertisement the hon. Member has in mind.

Mr. Janner: While expressing my gratitude to the hon. Lady for the expeditious way in which this was dealt with, in view of the fact that such a statement as
Time Gentlemen, please! One For the Road.
actually appeared on this franking, what kind of precautions does she intend to take to ensure that such a serious statement as that should not be contained in an allowed franking arrangement?

Miss Pike: This was a regrettable error. Steps have been taken to ensure that the rules are not infringed any more.

Mr. Mason: How closely does the hon. Lady watch these franking developments? This is not the first mistake in

recent months. We had the shocking franking recognising refugee year when the open hand appeared against the Monarch's head. Is there not need for closer scrutiny by the Post Office?

Miss Pike: Regrettable errors have occurred, but to err is human, and we have been very unfortunate in these instances.

Bear Cross Parade, Bournemouth

Mr. Eden: asked the Postmaster-General (1) what sub-offices are available in the borough of Bournemouth within one mile from Bear Cross Parade, Anchor Road, Bournemouth; and what is the extent of the counter space in each case;

(2) when he proposes to authorise the establishment of a new sub-office in Bear Cross Parade, Anchor Road, Bournemouth, in order to meet the needs of the substantially increased population in the district.

Miss Pike: There are three sub-post offices in the Borough of Bournemouth within a mile of Bear Cross Parade, Anchor Road. They are Cunningham Crescent, West Howe, and Kinson, and the lengths of their counters are 10½ feet., 10 feet. and 15 feet respectively. Also within a mile is the Bearwood sub-office, in the Borough of Poole, which has a counter 7 feet, long. I am sorry that in a letter sent to my hon. Friend in January it was wrongly stated that there were only three offices within a mile of Anchor Road. I am afraid I should not be justified in authorising yet another office in this area.

Mr. Eden: Is my hon. Friend aware that, whilst I appreciate that she has given this very full consideration, her Answer will, nevertheless, disappoint a very large number of people who have recently come into this area? Will she give an assurance that her mind is not closed on this subject and that the needs of this area will have top priority on her list?

Miss Pike: I am very glad to give an assurance that we will keep this under review. My hon. Friend is quite right in saying that there has been considerable housing development in this district. Within half a mile of this arcade the


population has risen, I think, from 2,000 to 7,900. The difficulty is that these offices are badly sited. We shall keep this in mind.

Premises, Crawley

Mr. Gough: asked the Postmaster-General what are the reasons for the delay in his negotiations with the West Sussex County Council regarding the lease of Post Office premises for use by the proposed county library at Crawley; and if he will make a statement.

Miss Pike: The County Council, the Post Office, and the Ordnance Survey will be sharing the use of this building, and the settlement of the details of the lease gave rise to some complications. I am sorry that it has all taken so long, but agreement on all points of substance has now been reached, and the Council took possession of its part of the premises on 25th June.

Mr. Gough: While I thank my hon. Friend for that reply, may I ask whether she is aware that there is very strong local feeling that the Post Office authorities have delayed this matter quite unnecessarily? Is she further aware that there is a strange coincidence between the agreement finally come to and the date on which I originally put this Question on the Order Paper?

Miss Pike: I realise that there has been some delay in this matter. It has been a very complicated one. On 25th March we suggested to the Council that it could take occupation in advance of formal agreement. It was not prepared to do that, however. The offer was repeated on 5th May and the Council took occupation on 25th June.

Space Communications

Mr. Mathew: asked the Postmaster-General what plans he has for the eventual introduction of long-range telephone, teleprinter and television circuits routed via the moon, satellites or other space bodies; and what research his Department is carrying out on this new low-cost method of communication.

Miss Pike: The possibilities of space communications are under close study by my officers and other organisations. It is, however, impossible for me to say

whether such techniques will provide reliable or economical means of communication.

Mr. Mathew: Is my hon. Friend aware that I am not asking the Post Office to reach for the moon in that sense? The American Post Office is already operating a successful long-distance, low-cost teleprinter service across the Pacific, and scientists, at any rate outside the Post Office, consider that this is the probable pattern of long-range communications for the future?

Miss Pike: I agree with my hon. Friend. The Post Office has always prided itself, in its 300 years of existence, on being well ahead of other people, and we are treating this as a matter of urgency.

Mr. W. R. Williams: While accepting the last part of that reply, may I ask the hon. Lady two questions? Is the Post Office Research Department keeping in close liaison with Jodrell Bank on this very interesting scientific possibility? Secondly, would it not be in the national interest for the British Government to give further financial assistance to Manchester University and to the Jodrell Bank authorities in order that there can be a still more intensive search into these possibilities, at the same time helping to prevent some of our leading scientists in this subject from accepting very tempting offers from the United States and other countries?

Miss Pike: The answer to the first part of the supplementary question is. "Yes" The second is not necessarily for the Post Office, but the Post Office is always glad to have more money for research

Oral Answers to Questions — WIRELESS AND TELEVISION

Satellite Station, Llandrindod Wells

Mr. Watkins: asked the Postmaster-General whether he will sanction the British Broadcasting Corporation to expedite the construction of the satellite station near Llandrindod Wells both for very high frequency radio and television inasmuch as the equipment is available; and whether he will give an assurance that the service will be available before next year.

Miss Pike: The B.B.C. does not need such sanction from my right hon. Friend. It tells us that it is pressing on as fast as it can with this station, but it cannot promise operation before the early summer of next year.

Mr. Watkins: Although her right hon. Friend has no power to direct the B.B.C., could the hon. Lady use her charming manner in order to ask it to do so? I do not want to see my constituents spending another Christmas without proper television reception, and with the bad weather in Wales they want to hear the radio at times.

Miss Pike: I can assure the hon. Gentleman that the B.B.C. is pressing on with this as quickly as possible.

Mr. Ness Edwards: Will the hon. Lady convey to the B.B.C. that we are of the impression that it has "ratted" on an undertaking given to a delegation of Welsh Members in connection with this matter?

Miss Pike: I am sure that it will take note of the right hon. Gentleman's observations.

Programmes

Mr. Boyden: asked the Postmaster-General if he will exercise his powers under Section 15 (4) of the Licence and Agreement to require the British Broadcasting Corporation to refrain from sending any television matter involving a display of violence.

Miss Pike: No, Sir.

Mr. Boyden: Is the hon. Lady satisfied that the B.B.C. exercises adequate scrutiny over programmes of this sort and is not in unhealthy competition with the commercial service?

Miss Pike: I assure the hon. Member that the B.B.C. watches this matter very carefully. Hon. Members will probably be aware of the B.B.C.'s recently published guide note for producers of television programmes. The B.B.C. is well aware of this problem, but it would be helpful if specific difficulties could be brought to its attention.

Mr. Lipton: Is the hon. Lady aware that the other night a television programme showed someone being hanged? Is that the sort of thing which should be encouraged?

Miss Pike: I did not see that programme, but I have heard that it drew a great deal of public comment.

Oral Answers to Questions — TELEPHONE SERVICE

Experimental Radiophone Service

Mr. Mason: asked the Postmaster-General how many vehicles have been fitted with a telephone instrument; if he is satisfied with the progress of this service; and if he will make a statement.

Miss Pike: I think the hon. Member has in mind the experimental radiophone service in South Lancashire. Fifty-four vehicles are now fitted with these telephones. The service is growing, but not as rapidly as I should like. Nor is it as yet economic. As to our future plans, I would refer the hon. Member to the detailed information which the Postmaster-General is circulating in today's OFFICIAL REPORT.

Mr. Mason: Is not the hon. Lady aware that it is not growing because it is not a satisfactory service? Is she not aware that a customer has to pay £200 for a set, it costs £30 in licence fees, and 10d. per minute to use, and that there is no privacy, no secrecy in using this telephone instrument? It is commonplace to listen in on cotton deals, sales of machinery, and private and intimate personal conversations. If the hon. Lady does not do something about ensuring secrecy on these telephone instruments, then telephone tapping in this service may even become a business.

Miss Pike: This new service is having teething troubles, but my right hon. Friend is looking at it carefully.

Telephone Directories, Leeds (Leaflets)

Mr. C. Pannell: asked the Postmaster-General whether his attention has been called to a leaflet, published by a Fascist body, sent to him by the hon. Member for Leeds, West, which is one of many deliberately left in telephone books in the City of Leeds; and what steps he will take to protect users of Post Office facilities from seditious libels in public places for which he is responsible.

Miss Pike: My right hon. Friend's attention has been drawn to this leaflet.
So far as Post Offices premises are concerned, our staffs try to keep them free from any matter which may be offensive to our customers.
As to the incidents referred to by the hon. Member, I am informed that the proper authorities are keeping a close watch on these people and on their offensive propaganda, and will take prompt action if there is any contravention of the law.

Mr. Pannell: Is the hon. Lady aware that, when I sent this leaflet to her right hon. Friend, I thought that he would consider the matter sufficiently serious to send it on to the Director of Public Prosecutions for him to decide whether there was any ground for an action for seditious libel? Bearing in mind that the leaflet bore the imprimatur of the printers, the Combat Press, of 116 City Road, London, is this not a serious matter which might lead to civil disorder in the City of Leeds? Is not the hon. Lady aware that in the opinion of some of us there is a plain duty on her right hon. Friend to stop this practice?

Miss Pike: The issue is one of sedition, and responsibility for that comes under the Home Office, whose attention has been drawn to the matter and which is keeping a watch on it.

Sir C. Taylor: Can we know what this pamphlet says, and can it be circulated in the OFFICIAL REPORT?

Miss Pike: This is one of a series of pamphlets and I do not think that any good purpose would be served by following the hon. Member's suggestion.

Waiting Lists and Shared Lines

Mr. Mason: asked the Postmaster-General what plans he has in mind for making the telephone service more attractive, for reducing the waiting list, and for eliminating the shared-line service.

Miss Pike: Our objectives for the telephone service were described in the White Paper (Cmd. 973) published last March. Some of the matters mentioned by the hon. Member depend on the capital resources available and the rate at which new applications are received. On others my right hon. Friend hopes to make a statement in the House today.

Mr. Mason: Is the hon. Lady aware that things are gradually getting worse in the Telephone Department of the Post Office; that there are still 147,000 people waiting for telephones and still 1 million using shared lines; that there is a demand for telephones, and that unless we get more subtle tariffs introduced, so that people will be encouraged to use telephones more when they get them, as well as encouraging the Treasury to hand over more money for telephone development, those potential customers will be lost?

Miss Pike: I assure the hon. Member that the hard core of the list numbers 50,000 and that the others are in the pipeline and are being attended to. Last year we connected 400,000 new telephones and with a buoyant economy the waiting list is always growing. We have this matter very much in mind. The hon. Gentleman will find that my right hon. Friend is well aware of all the possibilities suggested in the second part of the hon. Member's supplementary question.

Oral Answers to Questions — ROYAL AIR FORCE

United States Aircraft, United Kingdom

Mr. Frank Allaun: asked the Secretary of State for Air if he will ask the United States Government not to allow the National Aeronautics and Space Administration to repeat the U2 flights which have taken place from Laken-heath, England.

The Under-Secretary of State for Air (Mr. W. J. Taylor): I have nothing to add to the reply which my right hon. Friend gave to the hon. Member for Leeds, East (Mr. Healey) on 21st June.

Mr. Allaun: Is that evasion good enough, since the lives of every man, woman and child in our country may be lost in the event of another U2 incident? Will the Under-Secretary confirm or deny a statement by Mr. Hugh Dryden, deputy chief of N.A.S.A., testifying in Washington on 2nd June, that such flights had taken place from the American base at Lakenheath, Norfolk?

Mr. Taylor: I have no desire to be discourteous to the hon. Member or to


The House, but I am not prepared from this Box to confirm or deny anything of that kind.

Mr. G. Brown: rose—

Mr. Allaun: On a point of order. May I seek your guidance, Mr. Speaker? First, I put down this Question to the Minister of Defence, who was then top of the list for answering Questions, three weeks ago. It was transferred to the Secretary of State for Air. Yesterday, the Prime Minister told the House that if this Question were put down, he would answer it. Therefore, is the House not entitled to an answer now?

Mr. Speaker: I do not want to use up the rest of Question Time, but I am afraid that I may have to do so. The situation is extremely complicated and there is also involved in this context a Question by the hon. Member for Lincoln (Mr. de Freitas). The House knows the princple—we had it in connection with Questions relating to the nationalised industries. This is the one instance where the conduct of Ministers governs the operation of the rules of the House, in the sense that a refusal to answer a Question of a given class results in Questions of that class no longer being accepted by the Table. That is the difficulty.
The House will remember that a Question asked of the Secretary of State resulted in an Answer rather like that which has just been given by the Under-Secretary. Thereafter, the Table operated on the principle that that class of Question was therefore barred. The Question of the hon. Member for Salford, East (Mr. Frank Allaun) would have been condemned under that principle had it not been deferred, as he knows. We then took the view that, in view of what the Prime Minister said yesterday, the situation had changed from the point of view of the Table and that we could rightly allow Questions of this kind. We have done so and that is why there has been a change in the Table's practice for the moment. I say nothing about what the Answer of the Prime Minister may be, or what may be its form—I do not know—and I am not criticising anything that happens here. I am simply explaining, in answer to the point of order, what has happened.

Mr. G. Brown: The Under-Secretary said that he would not confirm or deny

reports on an issue which the people of Britain are entitled to have clearly put to them by Her Majesty's Ministers. Have these aircraft taken off from Laken-heath? Did they take off without permission or did they not? We can then consider what is the right thing, but should not Ministers stand up and say what they did on those occasions?

Mr. Taylor: I was referring to a supplementary question put by the hon. Member for Salford, East (Mr. Frank Allaun) which referred to evidence given before a United States Senate Committee which I did not feel was a matter for me.

Mr. G. Brown: The words the Under-Secretary used were, "I am not prepared to confirm or deny"—[Interruption.]—this must be a peculiar Tory mentality. The lives of British people are at stake and the whole policy of Britain is a stake. If Ministers want to persist in denying that, that is O.K. and I will leave it, but I want there to be no misunderstanding—the Minister is refusing to answer yes or no to the Question—[Interruption.]—I will go on when you shut up.—[HON MEMBERS: "Order"]—

Mr. Speaker: If the right hon. Member for Belper (Mr. G. Brown) wishes to make observations, he must address them to the Chair.

Mr. G. Brown: I beg your pardon, Mr. Speaker, but it helped to get a break in the conversation. May I ask the Minister whether aircraft took off from Lakenheath and, if so, did we know they were taking off?

Mr. Taylor: I have nothing to add to what I have already said.

Mr. Gaitskell: Is the hon. Member aware that in answer to a supplementary question yesterday the Prime Minister, with some reluctance, eventually agreed to answer if such a Question were put down?

Mr. Nabarro: My hon. Friend is not the Prime Minister.

Mr. Gaitskell: Did the hon. Member's office consult the Prime Minister's office before this reply was given today? Are we to assume from that reply that when the Prime Minister answers the Question he will also give us no information, or is


the hon. Gentleman merely leaving it to the Prime Minister to deal with the matter properly?

Mr. Nabarro: Say, "I am not the Prime Minister"!

Mr. Taylor: I do not think that the House needs reminding of that. I did not check whether my office had been in communication with No. 10 Downing Street, but the answer I have given seems to be perfectly clear.

Mr. G. Brown: In that case, what consultations took place in the hon. Member's private office before this Question was handed to him?

Mr. Taylor: That is another question. The right hon. Gentleman can put it down.

Mr. G. Brown: The Under-Secretary of State is sitting next to the Home Secretary who is the best stone-wailer in the business, but stone-walling has its complications. We are now playing with people's lives—[HON. MEMBERS: "Question"]—Are the Government not aware that we are playing with people's lives? Is the Minister really satisfied with giving us a reply that he has not cleared with the Prime Minister and which he has no reason to think is the Prime Minister's view, and which he has not cleared with the Leader of the House and has no reason to think is his view? With whom did he clear this answer, except with the hon. Member for Kidderminster (Mr. Nabarro).

Mr. Shinwell: Is it not obvious that the Under-Secretary is in a position of some difficulty?

Mr. Nabarro: No; he is doing very well.

Mr. Shinwell: This is a very serious matter. In view of the fact that, in reply to a series of questions yesterday, the Prime Minister clearly indicated that if a Question was put on the Order Paper he would reply to it, may we ask the Minister or the Leader of the House, who is present, whether, if a Question is put on the Order Paper—perhaps a Private Notice Question, in the circumstances—the Prime Minister will reply? Or can the Leader of the House give us an indication of the procedure that will be adopted?

Mr. Taylor: None of these matters is for me to reply to.

Mr. Shinwell: On a point of order. I am not quite certain whether it is a regular point of order, Mr. Speaker, but I think it is—

Mr. Speaker: I do not want to hear irregular points of order, even from the right hon. Gentleman.

Mr. Shinwell: What I meant was that I awaited your guidance. You will recognise that this is a very serious matter, in which the integrity of the Prime Minister is at stake. Yesterday he clearly indicated that if a Question were put on the Order Paper he would reply to it. The Prime Minister must have been aware that this Question was on the Order Paper today. Can you give hon. Members any guidance as to the way in which they should deal with the matter when the Prime Minister makes a clear statement of that kind?

Sir W. Wakefield: Did not my right hon. Friend say that if a Question were put to him he would answer it? That is a very different point from the one raised by the right hon. Gentleman.

Mr. Speaker: I would like to have this point of order supplemented, but by one hon. Member at at time.

Mr. Shinwell: The Prime Minister said that if a Question were put to him he would reply, but if a Question is put to him and it is transferred to the Secretary of State for Air what procedure can we adopt? How can we bring the Prime Minister into the dock on a question of this sort?

Several Hon. Members: rose—

Mr. Speaker: A number of hon. and right hon. Gentlemen wish to add to my wisdom in connection with this point of order, but if I collect all the views at once I shall have so many points to answer at once that the matter will become confused. In answer to the right hon. Member for Easington (Mr. Shinwell), I have not got the text of what the Prime Minister said in my hand —and it would not make any difference if I had, in the context, because whatever he said I should have no power, as a matter of order, to compel him to answer that Question. That is not a point of order.
The other point raised by the right hon. Member related to transfer, and the practice with regard to it. I have repeatedly said that I do not propose to depart from the established tradition and precedent that the transfer of Questions is not a matter in respect of which the Chair incurs any responsibility.

Mr. G. Brown: It is probably within your recollection, Mr. Speaker, and certainly within the recollection of all those who were here yesterday, that the Prime Minister said that if a Question were put to him he would answer it. A Question has been put down for today. Is it possible to conceive that neither the Prime Minister's office nor the Under-Secretary's office got together to arrange the answer which the Prime Minister yesterday meant us to have? If the Under-Secretary says that he has nothing to say on the question whether these aircraft flew from this base, is not the simple conclusion that they did, and he did not know about it?

Mr. Speaker: It is no good even the right hon. Gentleman trying to involve the Chair in a war of words between the two Front Benches.

Mr. G. Brown: That is the only way we can get at them.

Mr. Speaker: Exactly It is an abuse of the process of the House to try to involve the Chair in a war of words. It may be very good fun, but it is not a point of order.

Mr. Driberg: May I seek your permission at the appropriate moment, Mr. Speaker, when other supplementary questions and points of order have been dealt with, to move the Adjournment of the House under Standing Order No. 9 on a definite matter of urgent public importance, that is, the refusal of the Under-Secretary of State for Air to confirm or deny a statement that U2 flights have taken place from the United States Air Force base at Lakenheath? May I make a brief submission in support of that Motion, either now or when you direct me to do so?

Mr. Speaker: The hon. Member may indicate any reason why he thinks his Motion is within the Standing Order, but he must not make any part of the speech which he would make should I accede to his submission.

Mr. Driberg: I submit that my Motion is within the ambit of the Standing Order. This is clearly a definite matter; there is urgency because U2 flights may be started again at any minute, as has been indicated by official statements in the United States—there may be one tonight or tomorrow; and it is clearly a matter of public importance. It could hardly be of greater public importance.

Mr. Speaker: The hon. Member should bring me, please, his Motion in writing.

(Copy of Motion handed in.)

Mr. Speaker: The hon. Member asks leave to move the Adjournment of the House under Standing Order No. 9 on a definite matter of urgent public importance; that is, the refusal of the Under-Secretary of State for Air to confirm or deny the statement that U2 flights have taken place from the United States Air Force base at Lakenheath.
I regret that I cannot accede to the hon. Member's application. It is covered by direct precedent namely, the proposition that the refusal of a Minister to answer a Question does not found in an application under the Standing Order.

Mr. Allaun: I was about to attempt to move the Adjournment of the House for a slightly different reason which I should like you, Mr. Speaker, to consider. I beg to move the Adjournment of the House on a definite matter of urgent public importance, namely, the failure of the Government to tell the House whether or not American U2 aircraft are at present taking off from this country. I do this because I submit that this makes it a matter of urgency and therefore within the scope of the Standing Order.

Mr. Speaker: I am afraid that I have to enforce the "drill" upon the hon. Member. Would he be kind enough to bring me his Motion in writing?

(Copy of Motion handed in.)

Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House pursuant to Standing Order No. 9 on a definite matter of urgent public importance, namely, the failure of the Government to tell the House whether or not American U2 aircraft are at present taking off from this country.
I am afraid that I cannot accede to the hon. Member's request. I conceive


that to be governed by exactly the same principle as the last application—ingenious though it may be.

QUESTIONS TO MINISTERS

The following Question stood upon the Order Paper:

Mr. WYATT: To ask the Minister of Defence what further information he now has concerning the availability for service of the Blue Steel flying bomb.

Mr. Wyatt: On a point of order, Mr. Speaker, which is quite different from the last one, but also arises out of Question Time.
May I seek your guidance about Question No. 59? On 22nd June, I accused the Minister of Defence of having misled the House of Commons, in a debate on Blue Streak on 27th April, by saying that V-bombers were now being fitted with the Blue Steel flying bomb when, in fact, this bomb was not in production. On 22nd June, the Minister indignantly repudiated what I said.

Mr. Speaker: What is the hon. Member's point of order?

Mr. Wyatt: I am just coming to it. I have to explain the preliminaries, Sir.
After that, the Minister wrote to me and said that he had misled the House and whether I would be kind enough to put down a Question again so that he could straighten the matter out. I then did so and asked the Minister whether he would ask your permission, Mr. Speaker, to answer the Question orally as he had orally repudiated what I said and which he now wished to put right.
I warned the right hon. Gentleman that if he would not ask your permission, if he refused to do so, I should raise this point—[An HON. MEMBER: "What?"] I warned him that if he would not ask Mr. Speaker's permission I should raise this point of order because I think that a matter which had taken place orally in this House, on which the Minister now admits that he was wrong, ought to be cleared up orally and not by way of a Written Answer.
As the Minister of Defence knows, and as Mr. Speaker knows, Oral Questions to the Minister of Defence will not be reached again at Question Time before we rise for the Summer Recess.

Mr. Speaker: I cannot allow the hon. Member or anybody else, to make speeches on a point of order about points other than points of order. The conduct of everyone involved may be all wrong, or it may be all right, but it is not a point of order.

Mr. Wyatt: Further to that point of order—[HON. MEMBERS: "It is not a paint of order"] I submit that this is a real point of order of substance. I was orally repudiated in this House—[Laughter.] I understand hon. Members opposite laughing because they know perfectly well the skill of the Minister of Defence at trying to avoid any mistake he makes—

Hon. Members: Order.

Mr. Speaker: Order. I do not require the assistance of the House about this. It is not in accordance with my duty to allow hon. Members to usurp the time of the House to make speeches. I am delighted to bear them on what is strictly a point of order, but this is not a point of order, because I am motivated about the answering of Questions which are not reached by an application from the Minister to answer them. As the House knows, I have not in this instance received such an application, and no point of order arises.

Mr. Gaitskell: We are not desirous of involving you, Mr. Speaker, in a controversy which is not really your concern. But there is a point on which I think that we are entitled to seek your guidance and that concerns the conventions of the House. It is undoubtedly the case that the Minister of Defence has admitted that he gravely misled the House, and that he wishes to put the matter right. It is surely the normal convention, when a statement of this kind is made and then withdrawn privately, and when the Minister says that he wishes to correct the impression he gave, that it should be made orally. I ask you, Mr. Speaker, is this not the case so far as the normal conventions are concerned?

Mr. Speaker: I should not like to deliver a lecture on what may be or what may not be the conventions. I am really concerned with the practice of the House and the rules of order, which is, in any case, my duty. I know absolutely nothing of the circumstances of this matter.


I entirely accept that the Minister has expressed a desire to correct something, but I really do not think that by calling it a matter of convention it becomes a matter for the Chair.

Mr. Gaitskell: In that case, may I ask the Leader of the House, in view of the situation which has now developed, whether he will invite the Minister of Defence to make an oral statement on this matter?

The Secretary of State for the Home Department (Mr. R. A. Butler): I understand that this matter refers to Question No. 59. If that Question remains on the Order Paper the normal precedent would be for it to be answered by a Written Answer. If it is taken off the Order Paper it will not be answered at all. I am putting this to the hon. Member only because if the Question is left on the Order Paper it would normally be answered, but if it is not left on the Order Paper, if the position is open, I undertake to discuss it with my right hon. Friend.

Mr. Wyatt: If the Leader of the House is saying that the Minister will make an oral statement if I postpone my Question, I shall be very glad to do so.

Mr. Speaker: The hon. Member must decide for himself what he does with his Question.

Mr. Wyatt: Mr. Wyatt rose—

Lieu.-Colonel Bromley-Davenport: Sit down.

Mr. Wyatt: I was trying to give the Leader of the House a chance to behave in an honourable way—[HON. MEMBERS: "Oh"] If it would help him further I will withdraw my Question and put it down another day—postpone it.

Mr. G. Brown: Further to that point of order. I am sure that the Leader of the House is trying to help us, because he sees—if his hon. Friends do not—the importance of this matter, and that Oral Questions to the Minister of Defence will not be reached again before the House rises at the end of July.
Is the Leader of the House saying that he will discuss with his right hon. Friend the question of coming to the House and asking the leave of Mr. Speaker to make a statement? If he is saying that, he

will help us. I am not clear whether my hon. Friend is beyond the time when, technically, he can remove the Question from the Order Paper, but no doubt we can put that right. The point at present is whether the Leader of the House will discuss with his right hon. Friend the question of his coming here and making a statement. Is the Leader of the House saying that he will do that?

Mr. Butler: I was merely taking the normal precautions to preserve the procedure. In the event of there being a Written Answer, it would be a rather different discussion that I should have to have with my right hon. Friend. So that there shall be no misunderstanding I shall certainly discuss the matter with my right hon. Friend, whatever the procedure.

Mr. Wyatt: This is a very important matter. Surely back-bench Members have their rights. I am prepared to withdraw my Question, if I may do so, to give the Minister of Defence a chance to answer it orally.

Mr. Speaker: The question for me is not what the hon. Member is prepared to do, but what he can do. As a matter of order, he can withdraw his Question up to the end of Questions and I declare that, because of what has happened, we are still within Questions.

Mr. Chetwynd: I am sorry to trouble you further, Mr. Speaker, but there is another complication. The Question by my hon. Friend the Member for Bosworth (Mr. Wyatt) may be answered with my Question, which is the one before it and deals with precisely the same point. If my hon. Friend can defer his Question, I should like permission to defer mine.

Mr. Speaker: Yes, I think that it is sauce for both constituencies.

POST OFFICE (CHARGES)

The Postmaster-General (Mr. Reginald Bevins): With your permission, Mr. Speaker, and that of the House, I should like to make a statement on Post Office charges.
I want to encourage the use of residential telephones, especially during off-peak periods when existing plant is not fully used.
I am pleased to inform the House that I have decided:

1. To reduce to2½d. the local call charge for residential subscribers. The charge of 2d. for local call units payable by people in areas with subscriber Trunk Dialling will continue unchanged.
2. To reduce from 2s. 6d. to 2s. the charge for 3 minutes in the cheap rate period for trunk calls of more than 125 miles, connected by an operator.
3. To reduce from 1s. to 9d. the charge for 3 minutes in the cheap rate period for timed trunk calls of less than 35 miles, connected by an operator.
4. To apply the cheap rate period throughout the whole of Sundays.

I have also decided to reduce by from 12½ per cent. to 25 per cent. the rentals for certain sizes of private automatic branch exchanges.
The extension of the cheap rate period on Sundays will apply as from 10th July. In general, the other reductions will take effect as from 1st September.
I also intend to restore quarterly accounts to all telephone subscribers. This will require a phased programme over the next four years. I believe that the public will welcome a return to quarterly telephone accounts.
As from 1st September the charge per word for the Radio Telegraph Service with ships at sea at the standard rate will be 1s 8d instead of 1s. 6d.
I have also come to the conclusion that the inland registered service does not satisfactorily meet public requirements, and I have decided to provide a cheaper alternative to it for articles, such as documents, where it is more important to be able to prove delivery than to secure compensation in case of loss. This new service—the Recorded Delivery service—will require a supplementary fee of 6d. only, as opposed to 1s. for registration. It will provide both for a receipt on posting and on delivery. Compensation will be limited to £2.
At the same time, the minimum fee for both the inland and overseas registration services will be increased from 1s. to 1s. 6d. These changes will take effect at about the turn of the year and should make these services generally economic.
I have no intention at present of increasing the charges for inland telegrams.
Full details of these and some other minor changes will be circulated in the OFFICIAL REPORT.

Mr. Ness Edwards: I wish to associate myself with the House in congratulating the Postmaster-General on reversing the policy of his predecessor. I think that the cheap telephone service throughout Sunday will be very welcome, that it is fairly obvious that the quarterly accounts will be very welcome, and that there will be less quibbling about the charges which have been made for calls which people cannot remember.
I wish to ask the right hon. Gentleman whether he is satisfied that these concessions are really bold enough to win back the 300,000 subscribers which his predecessor lost. Is he not aware that it has always been our view that the maximum use of the telephone at a lower rate of profit is far better than the minimum use of the telephone with a high rate of profit? We hope that he will proceed on that policy of giving more and more concessions in respect of telephone charges so that we can get a much more general use of the telephone and a better return for the huge quantities of capital investment in the equipment.
Can the right hon. Gentleman tell us what is to be the cost to the Post Office of the concessions on the telephone rates? Secondly, will he let us know what is going to be the cost of the Recorded Delivery service? Thirdly, in the list that is to be circulated in the OFFICIAL REPORT, can he indicate how many cases there are of increased rather than decreased charges? In general, we welcome the right hon. Gentleman's approach to the general problem of revising charges for the telephone service. We only wish that he had not been quite so timid.

Mr. Bevins: I am grateful to the right hon. Member for what he said, except that what I have announced to the House this afternoon is in no sense a reversal of policies pursued by my predecessor. If, in due course, my successor takes as favourable a view of my endeavours as I take of the endeavours of my predecessor, I shall be very happy.
In reply to the detailed questions of the right hon. Member, the purpose of these changes in telephone tariffs is to encourage the use of the telephone rather than to build up an excessive demand for new telephones. That is the design. As to the cost of these concessions, all told, over the total field, the gross cost will amount to about £2¼ million to £2½ million in the next financial year.

Mr. Ness Edwards: How many cases of increased charges are involved in the statement which is to be circulated?

Mr. Bevins: There are one or two very minor ones, but, on the whole, the net effect is, of course, in favour of the public.

Sir T. Moore: As the Opposition will undoubtedly say that this statement is a prelude to a General Election, can we have an assurance that there is no truth in that suggestion?

Mr. Shinwell: May I ask the Postmaster-General whether he knows of any private industry in the United Kingdom which has reduced its charges as has this nationalised industry?

Mr. Bevins: Yes. There have been a considerable number of cases in which private enterprise has brought down prices during the last twelve months.

Hon. Members: Name them.

Mr. Mackie: While appreciating the right hon. Gentleman's decreases of telephone service costs, I wonder whether he would increase something to do with it, that is, the height of the bolt that holds the spring which closes the door of a telephone kiosk? It is exactly 6 ft. 2 ins. I have broken skin off my head twice and so far I have refrained from suing him, but if this happens a third time I shall have seriously to consider the matter.

POST OFFICE TARIFFS


INLAND TELEPHONES



Present Charges
New Charges


Local calls from Residence telephone, without coin box, except those in areas with Subscriber Trunk Dialling.
3d.
On accounts due after 1st September, 1960: 2½d.


Timed Trunk calls connected by an operator in the Cheap Rate Period:—




over 125 miles
2s. 6d. for 3 minutes (2s. 9d. from a call office)
From 1st September, 1960; 2s. for 3 minutes (2s. 3d. from a call office)


up to 35 miles
1s. for 3 minutes (1s. 3d. from a call office)
From 1st September, 1960: 9d. for 3 minutes (1s. from a call office

Mr. Watkins: Did the right hon. Gentleman give consideration to revising the charges for rentals in exchanges for subscribers over three miles and, if so, what decision did he come to? What was his finding?

Mr. Bevins: I have considered that matter on a very recent occasion. The fact is that charges for people in country districts are already very low in comparison with other countries and to make them lower still would increase demands and add to the claims on our limited capital resources.

Sir M. Galpern: Could the right hon. Gentleman give consideration to the complaint, which I am sure many hon. Members have received, to the effect that subscribers are unable to calculate the accuracy of the accounts rendered to them? A number of people have complained to me, as I am sure they have complained to other hon. Members, that they are alarmed to find that they have used a telephone to such an extent as is suggested by the account.
Would it be impossible for the Postmaster-General to indicate, as is the normal practice for anyone incurring an account, the details as to how that account has been arrived at and to show the actual number of calls incurred by subscribers so that they may be satisfied about the accuracy of the Department?

Mr. Bevins: It is open to any subscriber to challenge the accuracy of his telephone account, but the number of mistakes that are made is, in fact, very few. We are transferring to the new system of Subscriber Trunk Dialling, and as that comes into force the liability for error in accounting will progressively diminish.

Present Charges
New Charges


Cheap Rate Period on Sundays
2 p.m. to 6 a.m.
From 10th July, 1960 From 6 p.m. Saturdays until 6 a.m. Mondays


Private Automatic Branch Exchanges:—




Type No. 1:—




up to 15 automatic extensions
£200 a year
From 1st September 1960: £160 a year


25 to 35 automatic extensions
£280 a year
From 1st September, 1960: £240 a year


Type No. 2:—




up to 15 automatic extensions
£240 a year
From 1st September, 1960: £200 a year


25 to 35 automatic extensions
£320 a year
From 1st September, 1960: £280 a year


Type No. 3 (privately installed):—




For every 50 extensions
£120 a year
From 1st September, 1960: £90 a year


For each switchboard position
£60 a year
From 1st September, 1960: £50 a year


Experimental Radiophone service in South Lancashire:—




Calls in Service area
2s. 6d. for 3 minutes
From 1st September, 1960: 1s. 3d. for 3 minutes


Calls to or from places outside Service area
Trunk charge plus radio fee of 2s. for 3 minutes
From 1st September, 1960: Trunk charge plus radio fee of 1s. for 3 minutes

Orders of the Day — FINANCE BILL

As amended (in Committee and on recommittal) further considered.

New Clause.—(REPEAL OF TELEVISION DUTY.)

As from the beginning of September, nineteen hundred and sixty, section two of the Finance Act, 1957 (which imposes on television licences television duty at the standard yearly rate of one pound, subject to certain modifications) shall cease to have effect.—[Mr. Redhead.]

Brought up, and read the First time.

4.0 p.m.

Mr. E. C. Redhead: I beg to move, That the Clause be read a Second time.
The purpose of the Clause is the abolition of the television licence duty of £1 which is payable on every television licence taken out and which was first imposed in 1957. I want to advance as my primary justification for this proposal the fact that the circumstances which obtained when this duty was first introduced three years ago have changed and that the only reason which was adduced at that time for imposing the duty originally no longer exists. It is, therefore, my submission that in those circumstances this duty should be abolished.
May I remind the House of what those circumstances were? In 1957, the then Chancellor of the Exchequer, the right hon. Member for Monmouth (Mr. Thorneycroft) abolished Entertainments Duty which had been in existence since 1916, in respect of all forms of entertainment with the exception of the cinema. The then Chancellor of the Exchequer seemingly recognised that what he was doing, in leaving this tax applicable only to the cinema, was to apply a degree of discrimination against the cinema, and seemingly he sensed that it was unfair still to burden the cinema alone, particularly in view of the fact that it was engaged in a fierce competition with the television set.
To make abundantly clear what his reasons were for introducing this duty on television licences, I should like to quote, as I did on an earlier occasion, what the

then Chancellor said. Speaking of the Entertainments Duty, he said
… there have been many changes since the duty was introduced in 1916 and, indeed, since it was last revised in 1954. Some forms of entertainment are expanding. As they expand they affect the profit of the other types. In particular, television has, in recent years, grown to be a powerful competitor with other entertainments, and I have had to consider whether it is bearing a share of taxation comparable with its rivals. I have not overlooked the fact that anyone who buys a television set pays a substantial amount of Purchase Tax upon it. But there is no tax on its use comparable with the tax on the admission price to a cinema. I am satisfied that a fairer balance in the taxation of these competitive entertainments is desirable."—[OFFICIAL REPORT, 9th April, 1957; Vol. 568, c. 989.]
I submit that that statement clearly shows that the television licence duty was imposed by way of consolation to the cinema, burdened, as it continued to be, by Entertainments Duty, and to rectify, to use the then Chancellor's own words,
the balance in the taxation of these competitive entertainments".
As I said earlier, in Committee, this was completely consistent with a fairly well-established principle of taxation of applying a countervailing duty—when a duty was applied to one service or article, to apply similarly a duty to any alternative or competitive service or article. But in Clause 4 of this Bill we have already agreed to the entire repeal of Entertainments Duty. In those circumstances, the ostensible reason for imposing a television licence duty has entirely disappeared. It is my submission that to perpetuate it in these completely changed circumstances is to repeat unjustifiably the history of so many taxes which have been imposed in the past, supposedly for limited reasons or for a limited period, only to be prolonged far beyond their original intention and when the reasons for them have disappeared. In these circumstances, the Chancellor is giving up £7½ million of revenue through the repeal of the Entertainments Duty, but is holding very rigidly to an expected revenue of £11½ million which accrues to him by the television licence duty.
The public, which has derived no benefit whatever from the remission of Entertainments Duty on the cinema—for reasons which we have discussed before—still has to meet this new impost of the television licence duty. I think


that it is fair to lay emphasis upon the fact that those who have television sets already contribute quite substantially to the revenue in the substantial levy of Purchase Tax upon television sets and upon some of the component parts.
I suggest that there is no longer any justification for the maintenance of this separate television licence duty. Let no one imagine for a moment that it has any justification on the ground that the revenue derived from it is used in any way for an improvement or expansion of television services. The whole of the proceeds of this duty go to swell the revenue.
I also plead, in aid of my contention that this licence duty has outlived its purpose, the fact that today, in many homes, television can no longer justifiably be regarded as a pure luxury. On the contrary, there are thousands of homes—and I am thinking particularly of the thousands of old people—in which the television set is a boon, a comfort and a relief in their loneliness. I am sure that there are hon. Members on both sides of the House who know of many cases in which that is true.
Unfortunately, many old people, particularly with the burden of Purchase Tax upon such sets, are unable in these unhappy days to purchase sets for themselves. I know, as I am sure do other hon. Members, of cases in which, in compassion, friends and relatives, recognising the boon that the television set is to such old people, either buy sets for them, or arrange for some second-hand reconditioned sets to be made available to them.
Then comes the burden of the licence. For the licence in those circumstances to have imposed upon it a licence Excise duty of an additional £1 is, to my mind, to inflict taxation on an act of charity and good will exercised towards these old people. In those circumstances, it is a completely unwarranted additional burden. Nor can it be justified that an Excise licence duty has to be paid in respect of the use of television sets by schools and educational institutions, to which the television service is increasingly becoming an educational asset.
Therefore, on all grounds there is no longer any justification for perpetuating

this duty. I hope that the Chancellor of the Exchequer will not repeat the sad history of Entertainments Duty and other duties. I hope that he is not introducing this Measure with the excuse that it is for a supposedly purely temporary period or to meet particular circumstances, but then, when the circumstances have changed, perpetuate it solely because the revenue derived from it is so attractive that he is unwilling to forgo it.
The right hon. Gentleman must recognise that the original reason for this duty has now disappeared. If he nevertheless feels that on other and more general grounds it is justifiable to look in the field of television for additional revenue, I suggest to him that it would be more equitable to seek such revenue not from the users of television in this direct form, but from those who are making large and inordinate profits in this field in the direction of commercial advertising on television.
That is a point on which doubtless some of my hon. Friends better versed in that field than I will probably want to dilate. I contend primarily that the justification for the new Clause lies in the fact that the only reason ever adduced for its introduction no longer obtains, and that, therefore, it is an act of equity that the duty itself should now be abolished.

Mr. Donald Chapman: My hon. Friend the Member for Walthamstow, West (Mr. Redhead) has moved the Clause with such a wealth of explanation and evidence that it does not leave anyone else with very much to say. He was correct in saying that the rational justification for this duty has disappeared. The duties on its competitors—other forms of entertainments—have been repealed, and, therefore, the justification for the introduction of this duty has disappeared.
My hon. Friend was right in saying that the main worry of the Chancellor of the Exchequer will no doubt be that he cannot afford to forgo the revenue involved. Therefore, I want very briefly to follow my hon. Friend in suggesting that the right hon. Gentleman makes it up from other sources within the television industry. My hon. Friend was right in saying that it is now proper that this tax on the viewer should be transferred and become a tax on the industry.
One has only to look at the present state of advertising revenues in commercial television to see how well the industry can afford it. I have not added up this year's profits on Independent Television, but I should be surprised if they are not about £50 million. Even after all the ordinary rate of taxes has been paid on that £50 million, I should be very surprised if the Chancellor could not make up quite fairly from the industry most of the £10 million which he obtains from this duty.
After all, we have now reached the position when the poor viewer pays both ways. First, he has to pay Purchase Tax on his television set. Then he has to sit at home and pay the duty. He has to stand the burden of watching the programmes, which are making profits on an inordinate scale now for the television companies. The duty lies most unfairly on the poor viewer and should be transferred to the pople who put out the advertisements.
There is a further factor which is worth considering. As the Television Act has worked out, there is no doubt whatsoever that what we have done is to set up regional monopolies in various parts of this country. There is no competition whatsoever in the world of Independent Television. In the Television Act we tried to provide that the Authority was to see that there was competition between different programme contractors.
What has happened, in practice, is that the Authority has had to give regional monopolies to particular programme companies. The result is that in the regions they are in the happy position of being able to mount millions upon millions in their profits because of the sheer absence of competition in their own region. The Act has proved unworkable.

4.15 p.m.

Mr. Speaker: That must be the absolute limit to Which I am entitled to indulge the hon. Member on this proposition.

Mr. Chapman: I will draw what I was saying to a close, Mr. Speaker.
All that I wanted to add to that simple point was that we have now reached a situation where the industry, particularly

because of the limited number of programme contractors in it, is proving extremely profitable. It has surplus funds. I hand it to the industry that it is putting some of its funds to use for charitable and educational purposes, but it remains true that any revenue the Chancellor would lose if he accepted this Clause could be made up quite easily by a new television tax on that end of the television industry.
I do not think that the industry would mind paying it now. The companies are so happy with the profits they are making—they are happier still with some of the capital profits that they have made from starting the industry—that they would take it in their stride at the moment and would almost accept it quite freely as a legitimate impost on what has become a monopoly situation in various regions.
For those reasons, my hon. Friend was right in saying that this duty is now misplaced. It ought to be imposed on another part of the industry. I hope that we can persuade the Government to accept the Clause.

The Economic Secretary to the Treasury (Mr. Anthony Barber): As the hon. Member for Walthamstow, West (Mr. Redhead) said, the purpose of the Clause is to repeal the television duty of £1 a year on a normal licence costing £3. I should tell the House at the outset that the cost of it in a full year would be £11½ million and in this year £8½ million, because the Clause provides that it shall only become operative on 1st September.
The hon. Member described the television duty as a countervailing duty. He is quite right in saying that one of the reasons for the introduction of the television duty in 1957 was to secure a fairer balance in the taxation of competitive entertainments. But he then went on to say on two occasions that this was the only reason. If he considers the matter again he will realise that Entertainments Duty on the cinema was certainly not the only factor which prompted the introduction of the television duty.
The hon. Member quoted from the speech of my right hon. Friend the Member for Monmouth (Mr. Thorneycroft), when he was Chancellor of the Exchequer. The hon. Member will have


noted that one of my right hon. Friend's observations was:
Entertainment is not in itself an unreasonable object of taxation …"—[OFFICIAL REPORT, 9th April, 1957; Vol. 568, c. 989.]
What is perhaps more apposite in view of what the hon. Member said in moving the Clause is that my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), who was then Financial Secretary to the Treasury, said this:
… television viewing forms a suitable subject for the imposition of duty; … and … it is a duty which can very properly replace the revenue remitted on sport and the theatre."—[OFFICIAL REPORT, 23rd May, 1957; Vol. 570, c. 1536.]
I mention these matters only because the House would be under an illusion if it considered that the only matter which prompted my right hon. Friend the Member for Monmouth to introduce this duty in 1957 was its relationship to the Entertainments Duty on the cinema.
The hon. Member for Walthamstow, West rightly said that circumstances have changed since this duty was first introduced. Whatever differing views we may take about the circumstances of its introduction, what are really relevant to this afternoon's consideration are the circumstances of today. There is a complete contrast between television and the cinema industry. I should like to give the House a few figures which are very relevant in this context.
The television duty was introduced in 1957 and in that year the number of television sets sold on the home market was 1,816,000. Last year—only two years later—that number had risen to 2,754,000. In the fiscal year 1957–58, the first year in which the television duty was operative, the number of licences issued was 8,114,000. Last year, it had risen to 10,576,000. Expansion of the industry is continuing, and the licence sales during this fiscal year are likely to amount to about 11½ million. Contrast that with what has been happening in the cinema industry, which, as every hon. Member knows, has been declining for years. Admissions fell from a peak of 1,600 million in 1946 to 1,200 million in 1955, 915 million in 1957, and 601 million last year. The decline is still continuing.
As the House knows—and I shall not weary it with the figures again, because

I have given them before—the rate of closures of cinemas has continued to be heavy, and it was, in the main, for these reasons that my right hon. Friend thought it right this year to abolish the Entertainments Duty on the cinema. I cannot see why that is a reason, in the present circumstances, for selecting television licence holders for a concession. The abolition of the duty on the cinema will, I think, be a real help to the industry, but no one can claim that the abolition of the television duty would be of any significant benefit to the television industry. Indeed, from the figures that I have given, I think that it is quite apparent that the industry does not need it.
The hon. Member for Walthamstow, West went on, very fairly, to say that television is today a great boon for many old people who are living on their own, and I am sure that he is absolutely right, but I should like the House to consider very briefly the sort of people whom we are considering. It is perfectly true, as the hon. Member said, that in some cases television sets are provided by relatives and friends. But the great bulk of the 11 million people who own television sets have paid perhaps £60 or £70 for a set and are also prepared to pay the annual licence fee of £3. I think that it is fair to ask the hon. Member whether it is really too much to expect these people to pay an extra 4½d. a week, which is all that this duty amounts to—in other words, less than the cost of a couple of cigarettes.
The hon. Gentleman quite fairly referred, in his closing observations, to the economic situation. I have said that this duty would, in fact, cost £11½ million in a full year and £8½ million this year. My right hon. Friend has explained why he is not able to propose this year any net reduction in taxation, and I shall not go over that ground again this afternoon, but it follows from his assessment of the situation that if we were to agree to this proposal either he would have to cut out a reduction which he has already made, or he would have to find another source of revenue to make up the £8½ million this year and the £11½ million in a full year.
The hon. Member for Birmingham, Northfield (Mr. Chapman) thought that it would be a good thing to get the


money from some other source connected with the television industry, but I do not think that most hon. Members will disagree with me when I say that we believe that it would be quite wrong to adopt either of these courses. For

those reasons, I cannot advise the House to accept the Clause.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 171, Noes 233.

Division No. 132.]
AYES
[4.25 p.m.


Abse, Leo
Healey, Denis
Pearson, Arthur (Pontypridd)


Ainsley, William
Hill, J. (Midlothian)
Peart, Frederick


Albu, Austen
Hilton, A. V.
Pentland, Norman


Allaun, Frank (Salford, E.)
Holman, Percy
Plummer, Sir Leslie


Awbery, Stan
Houghton, Douglas
Price, J. T. (Westhoughton)


Bacon, Miss Alice
Hughes, Cledwyn (Anglesey)
Probert, Arthur


Bellenger, Rt. Hon. F. J.
Hughes, Emrys (S. Ayrshire)
Randall, Harry


Benson, Sir George
Hunter, A. E.
Rankin, John


Blackburn, F.
Hynd, H. (Accrington)
Redhead, E. C.


Boardman, H.
Hynd, John (Attercliffe)
Reid, William


Bowden, Herbert W. (Leics, S.W.)
Irvine, A. J. (Edge Hill)
Reynolds, G. W.


Bowles, Frank
Irving, Sydney (Dartford)
Ross, William


Boyden, James
Janner, Barnett
Royle, Charles (Salford, West)


Braddock, Mrs. E. M.
Jay, Rt. Hon. Douglas
Shinwell, Rt. Hon. E.


Brockway, A. Fenner
Johnson, Carol (Lewisham, S.)
Short, Edward


Brown, Rt. Hon. George (Belper)
Jones. Rt. Hn. A. Creech (Wakefield)
Silverman, Julius (Aston)


Brown, Thomas (Ince)
Jones, Dan (Burnley)
Slater, Mrs. Harriet (Stoke, N.)


Butler, Herbert (Hackney, C.)
Jones, Elwyn (West Ham, S.)
Slater, Joseph (Sedgefield)


Butler, Mrs. Joyce (Wood Green)
Jones, Jack (Rotherham)
Small, William


Castle, Mrs. Barbara
Jones, J. Idwal (Wrexham)
Smith, Ellis (Stoke, S.)


Chapman, Donald
Jones, T. W. (Merioneth)
Snow, Julian


Chetwynd, George
Kelley, Richard
Sorensen, R. w.


Cliffe, Michael
Kenyon, Clifford
Spriggs, Leslie


Corbet, Mrs. Freda
Key, Rt. Hon. C. W.
Steele, Thomas


Craddock, George (Bradford, S.)
King, Dr. Horace
Stewart, Michael (Fulham)


Crosland, Anthony
Lee, Frederick (Newton)
Stones, William


Crossman, R. H. S.
Lever, Harold (Cheetham)
Stross, Dr. Barnett (Stoke-on-Trent, C.)


Cullen, Mrs. Alice
Lipton, Marcus
Summerskill, Dr. Rt. Hon. Edith


Davies, G. Elfed (Rhondda, E.)
Logan, David
Swingler, Stephen


Davies, Harold (Leek)
Mabon, Dr. J. Dickson
Sylvester, George


Davies, Ifor (Gower)
McCann, James
Taylor, Belnard (Mansfield)


Davies, S. O. (Merthyr)
MacColl, James
Taylor, John (West Lothian)


de Freitas, Geoffrey
McInnes, James
Thomas, Iorwerth (Rhondda, W.)


Delargy, Hugh
McKay, John (Wallsend)
Thompson, Dr. Alan (Dunfermline)


Dempsey, James
Mackie, John
Thomson, G. M. (Dundee, E.)


Diamond, John
Mallalieu, E. L. (Brigg)
Thornton, Ernest


Dodds, Norman
Mallalieu, J.P.W.(Huddersfield, E.)
Wainwright, Edwin


Driberg, Tom
Manuel A. C.
Warbey, William


Dugdale, Rt. Hon. John
Mapp, Charles
Watkins, Tudor


Ede, Rt. Hon. Chuter
Mason, Roy
Weitzman, David


Edelman, Maurice
Mayhew, Christopher
Wells, Percy (Faversham)


Edwards, Rt. Hon. Ness (Caerphilly)
Mellish, R. J.
Wells, William (Walsall, N.)


Edwards, Robert (Bilston)
Millan, Bruce
Wheeldon, W. E.


Edwards, Walter (Stepney)
Mitchison, G. R.
White, Mrs. Eirene


Evans, Albert
Monslow, Walter
Whitlock, William


Forman, J. C.
Moody, A. S.
Williams, D. J. (Neath)


Fraser, Thomas (Hamilton)
Mort, D. L.
Williams, W. R. (Openshaw)


Gaitskell, Rt. Hon. Hugh
Moyle, Arthur
Willis, E. G. (Edinburgh, E.)


Galpern, Sir Myer
Neal, Harold
Wilson, Rt. Hon. Harold (Huyton)


Ginsburg, David
Noel-Baker, Rt. Hn. Philip (Derby, S.)
Winterbottom, R. E.


Gordon Walker, Rt. Hon. P. C.
Oliver, G. H.
Woodburn, Rt. Hon. A.


Gourlay, Harry
Oram, A. E.
Woof, Robert


Grey, Charles
Owen, Will
Wyatt, Woodrow


Gunter, Ray
Pannell, Charles (Leeds, W.)
Yates, Victor (Ladywood)


Hall, Rt. Hon. Glenvil (Colne Valley)
Parker, John (Dagenham)
Zilliacus, K.


Hamilton, William (West Fife)
Parkin, B. T. (Paddington, N.)



Hannan, William
Paton, John
TELLERS FOR THE AYES:


Hayman, F. H.
Pavitt, Laurence
Mr. Cronin and Mr. Mahon.




NOES


Allan, Robert (Paddington, S.)
Baxter, Sir Beverley (Southgate)
Bowen, Roderic (Cardigan)


Allason, James
Beamish, Col. Tufton
Box, Donald


Amory, Rt. Hn. D. Heathcoat (Tlv'tn)
Bennett, F. M. (Torquay)
Boyle, Sir Edward


Arbuthnot, John
Berkeley, Humphry
Brewis, John


Ashton, Sir Hubert
Biggs-Davison, John
Bromley-Davenport, Lt.-Col. W. H.


Atkins, Humphrey
Bingham, R. M.
Brooke, Rt. Hon. Henry


Barber, Anthony
Birch, Rt. Hon. Nigel
Brooman-White, R.


Barlow, Sir John
Bishop, F. P.
Browne, Percy (Torrington)


Barter, John
Bossom, Clive
Bullard, Denys


Batsford, Brian
Bourne-Arton, A.
Burden, F. A.




Butcher, Sir Herbert
Hopkins, Alan
Peel, John


Butler, Rt. Hn. R. A. (Saffron Walden)
Hornby, R. P.
Percival, Ian


Campbell, Sir David (Belfast, S.)
Hornsby-Smith, Rt. Hon. Patricia
Pickthorn, Sir Kenneth


Campbell, Gordon (Moray &amp; Nairn)
Howard, John (Southampton, Test)
Pike, Miss Mervyn


Carr, Robert (Mitcham)
Hughes Hallett, Vice-Admiral John
Pilkington, Capt. Richard


Cary, Sir Robert
Hughes-Young, Michael
Pitman, I. J.


Channon, H. P. G.
Hutchison, Michael Clark
Pitt, Miss Edith


Chataway, Christopher
Iremonger, T. L.
Powell, J. Enoch


Cole, Norman
Irvine, Bryant Godman (Rye)
Prior, J. M. L.


Collard, Richard
Jackson, John
Prior-Palmer, Brig. Sir Otho


Cooke, Robert
Jenkins, Robert (Dulwich)
Proudfoot, Wilfred


Cooper, A. E.
Johnson, Dr. Donald (Carlisle)
Ramsden, James


Cordeaux, Lt.-Col. J. K.
Johnson, Eric (Blackley)
Redmayne, Rt. Hon. Martin


Cordle, John
Johnson Smith, Geoffrey
Rees, Hugh


Corfield, F. V.
Joseph, Sir Keith
Renton, David


Costain, A. P.
Kerans, Cdr. J. S.
Ridley, Hon. Nicholas


Courtney, Cdr. Anthony
Kerby, Capt. Henry
Ridsdale, Julian


Craddock, Sir Beresford
Kerr, Sir Hamilton
Roberts, Sir Peter (Heeley)


Critchley, Julian
Kershaw, Anthony
Robinson, Sir Roland (Blackpool, S.)


Cunningham, Knox
Kimball, Marcus
Ropner, Col. Sir Leonard


Currie, G. B. H.
Kirk, Peter
Sandys, Rt. Hon. Duncan


Dalkeith, Earl of
Kitson, Timothy
Scott-Hopkins, James


Dance, James
Lancaster, Col. C. G.
Sharples, Richard


d'Avigdor-Goldsmid, Sir Henry
Leather, E. H. C.
Shepherd, William


de Ferranti, Basil
Leavey, J. A.
Simon, Sir Jocelyn


Donaldson, Cmdr. C. E. M.
Legge-Bourke, Sir Harry
Skeet, T. H. H.


Drayson, G. B.
Lewis, Kenneth (Rutland)
Smith, Dudley (Br'ntf'rd &amp; Chiswick)


Duncan, Sir James
Lilley, F. J. P.
Smithers, Peter


Eden, John
Lindsay, Martin
Spearman, Sir Alexander


Elliott, R. W.
Linstead, Sir Hugh
Speir, Rupert


Emery, Peter
Litchfield, Capt. John
Stevens, Geoffrey


Emmet, Hon. Mrs. Evelyn
Lloyd, Rt. Hn. Geoffrey(Sut'nC'dfield)
Stodart, J. A.


Farr, John
Longbottom, Charles
Storey, Sir Samuel


Fell, Anthony
Longden, Gilbert
Studholme, Sir Henry


Finlay, Graeme
Loveys, Walter H.
Summers, Sir Spencer (Aylesbury)


Fisher, Nigel
Low, Rt. Hon. Sir Toby
Talbot, John E.


Fletcher-Cooke, Charles
Lucas-Tooth, Sir Hugh
Tapsell, Peter


Fraser, Ian (Plymouth, Sutton)
MacArthur, Ian
Taylor, Sir Charles (Eastbourne)


Freeth, Denzil
McLaughlin, Mrs. Patricia
Taylor, W. J. (Bradford, N.)


Gardner, Edward
Maclay, Rt. Hon. John
Teeling, William


George, J. C. (Pollok)
Macleod, Rt. Hn. Iain (Enfield, W.)
Temple, John M.


Gibson-Watt, David
MacLeod, John (Ross &amp; Cromarty)
Thomas, Leslie (Canterbury)


Glover, Sir Douglas
McMaster, Stanley R.
Thompson, Kenneth (Walton)


Glyn, Dr. Alan (Clapham)
Macpherson, Niall (Dumfries)
Thornton-Kemsley, Sir Colin


Glyn, Sir Richard (Dorset, N.)
Maddan, Martin
Tiley, Arthur (Bradford, W.)


Goodhart, Philip
Maitland, Cdr. Sir John
Tilney, John (Wavertree)


Goodhew, Victor
Manningham-Buller, Rt. Hon. Sir R.
Turner, Colin


Gower, Raymond
Markham, Major Sir Frank
Turton, Rt. Hon. R. H.


Grant, Rt. Hon. William (Woodside)
Marlowe Anthony
van Straubenzee, W. R.


Green, Alan
Marshall, Douglas
Wade, Donald


Grimond, J.
Marten, Neil
Wakefield, Edward (Derbyshire,w.)


Grimston, Sir Robert
Mathew, Robert (Honiton)
Wakefield, Sir Wavell (St. M'lebone)


Hamilton, Michael (Wellingborough)
Matthews, Gordon (Meriden)
Wall, Patrick


Harris, Reader (Heston)
Mawby, Ray
Watts, James


Harrison, Brian (Maldon)
Mills, Stratton
Wells, John (Maidstone)


Harrison, Col. J. H. (Eye)
Montgomery, Fergus
Whitelaw, William


Harvie Anderson, Miss
Moore, Sir Thomas
Williams, Dudley (Exeter)


Hay, John
Mott-Radclyffe, Sir Charles
Williams, Paul (Sunderland, S.)


Henderson, John (Cathcart)
Nabarro, Gerald
Wills, Sir Gerald (Bridgwater)


Hendry, Forbes
Neave, Airey
Wolrige-Gordon, Patrick


Hicks Beach, Maj. W.
Nicholls, Harmar
Wood, Rt. Hon. Richard


Hiley, Joseph
Noble, Michael
Woodhouse, C. M.


Hill, Dr. Rt. Hon. Charles (Luton)
Oakshott, Sir Hendrie
Woodnutt, Mark


Hinchingbrooke, Viscount
Ormsby Gore, Rt. Hon. D.
Worsley, Marcus


Hirst, Geoffrey
Orr-Ewing, C. Ian
Yates, William (The Wrekin)


Hobson, John
Osborn, John (Hallam)



Hocking, Philip N.
Osborne, Cyril (Louth)
TELLERS FOR THE NOES:


Holland, Phillip
Pannell, Norman (Kirkdale)
Mr. Bryan and Mr. J. E. B. Hill.


Holt, Arthur
Partridge, E.

New Clause.—(VOLUNTARY OFFERINGS TO CLERGYMEN.)

The earnings of clergymen and ministers of religion, of all denominations, so far as derived from the voluntary offerings of their congregations in the immediately preceding year, shall, to the extent of one hundred pounds in each case, be disregarded as income for the purposes of any of the Income Tax Acts for any future year of assessment—[Mr. Hendry.]

Brought up, and read the First time.

Mr. Forbes Hendry: I beg to move, That the Clause be read a Second time.
I do not propose to detain the House long, because in Committee this proposal, in a slightly different form, was debated at some length. You will recognise, Sir, that it is a lineal descendant of a new Clause about Easter offerings which stood on the Notice Paper, in Committee, in the name of my hon. and


gallant Friend the Member for Cheltenham (Major Hicks Beach). I have made certain amendments to the proposal since it was considered in Committee.
I do not propose to go into all the arguments which I adduced in Committee, because, although my right hon. Friend the Chancellor of the Exchequer was not present throughout the debate, he is a man of such honour that he will have read all the arguments which were put forward, and I think that most hon. Members who are here now were present then. It is, however, necessary, to examine for a moment the reasons why my right hon. Friend's predecessors have not found themselves able to agree to an attempt to keep the hand of the tax collector out of the sacrificial offerings of churchmen of all denominations.
There is a great deal of disgust up and down the country and, I venture to say, on both sides of the House that these sacrificial offerings should be tampered with for the sordid purpose of running the country when they are given for purely spiritual purposes which are on a higher plane and which we in this House have a duty to regard.
In the past, proposals of this sort have been supported by the leaders of both sides, including my right hon. Friend the Prime Minister. It is for that reason that, once again, I should like to go over the objections which have been made to proposals of this sort in an effort to try to ease the burden of my right hon. Friend the Chancellor in dealing with my present proposal. I have tried to do that 'before. I have tried to explain why we are justified in departing from the usual principle of taxation—that there should be no discrimination between persons. I have tried to point out, and the Chancellor has agreed, that there is a unique difference between the clergy, of whatever denomination it may be, and all other people in this country. They are men of vocation. They are called to their spiritual work, not for any purpose of gain, but because they have a direct call from above.
The voluntary offerings of the people are, to a very large degree, sacrificial offerings. They are offered to God for the spiritual guidance and spiritual comfort given to them by the clergy. They are tokens of spiritual gratitude and are

not to be confused in any way, as has so often been done in the House, with tips to servants and others for personal services. In Committee, on 22nd June, the Chancellor said that he did not
in any way place those kind of offerings on the same level as voluntary offerings to the clergy."—[OFFICIAL REPORT, 22nd June. 1960; Vol. 625, c. 586.]
By "those kind of offerings" he meant tips and gratuities of that sort. We have discriminated in favour of a unique body which cannot be confused in anybody's mind with any other body of men in this country. The Chancellor conceded that there was a very great difference in that case.
My hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) put forward a very valid objection. He has a very logical mind. He said that this proposal would create a precedent and that it was illogical and contrary to all the orthodox principles of taxation to make a departure in this way. I suggest that this is a case where we should not be logical. The spiritual experiences which we all have from time to time are not logical things. They are matters of faith. They are very deep feelings which we experience. We cannot possibly measure these things in terms of pure logic. I suggest, with the greatest seriousness, that this is a case where we may disregard logic and the ordinary precepts and principles of taxation. This is a case where we ought to make a concession in very special circumstances.
The other objection which has been adduced in the past to a proposal of this kind is that it discriminates in favour of certain denominations. That was the case in the past, and it was so in the case of the proposed Clause in the name of my hon. and gallant Friend the Member for Cheltenham, which sought to exempt Easter offerings, because it discriminated in favour of one particular religious denomination. But my proposed Clause embraces all denominations—Christian and otherwise—in this country. Every proper religious denomination stands to benefit from it.
I suggest that I have got over one of the very grave objections to Clauses of this sort in the past. Since this subject was discussed in Committee I have given it further study and thought in the light of what was said then. The first real


objection which was raised in Committee was that there would be unfairness between one type of clergyman and another. Certain clergymen of different denominations derive their full stipend income from the voluntary offerings of their people whereas in other Churches, notably in the Church of England and the Established Church of Scotland, the income of certain of the clergy, at any rate, is derived from tithes in the case of England and teinds in the case of Scotland.
There would be a discrimination against a clergyman of the Established Church who receives a larger proportion of his income from other sources compared with the proportion represented by the voluntary offerings of his people. He would be in an unfortunate position compared with a Nonconformist minister whose stipend income came entirely from the voluntary offerings of his people. For that reason, I gave thought to this matter and I have further amended my Clause since the Committee stage by limiting the amount to £100 in each case.
If my right hon. Friend the Chancellor of the Exchequer should think that my paltry figure of£100 is still too high, I am prepared, with the permission of the House, to suggest that he might accept a smaller figure—say£50. I think that many hon. Members would be prepared to accept such a figure so long as we could get the principle accepted.

Mr. Chapman: Could the hon. Gentleman say why he chose a figure of £100? Would that not cover every case, anyway?

Mr. Hendry: One reason for choosing a figure of £100 is that in many cases there might be a far greater sum than £100 involved. In Committee, one hon. Member referred to Nonconformist ministers and others, without endowments, receiving as much as £800 a year. It was considered that to exempt an income of £800 a year completely from taxation could not be justified. For that reason, I took the modest figure of £100. It was to some extent a purely arbitrary figure and, as I say, if my right hon. Friend thinks that it is too high, it is for him to say so and it might well be that the House would agree to a lower figure than that.

Mr. Douglas Houghton: Why does the hon. Gentleman propose a limit at all? If this is spiritual money and not secular money, why is there any limit?

Mr. Hendry: The reason is twofold. The first reason is that I am trying to establish a principle. After all, this matter has been argued in this House for upwards of forty years. Various Chancellors of the Exchequer have agreed that something ought to be done along these lines, but so far every Chancellor has failed to find a means of doing it. We hope that the present Chancellor, or one of his successors, will find a way of producing fairness in these matters. I would remind the House that in 1957 the then Chancellor of the Exchequer promised that he would look into this matter.

4.45 p.m.

Mr. Glenvil Hall: Surely the hon. Gentleman has got this matter rather muddled. We have had this debate year after year for a good many years, and up till now, so far as my memory serves me, all that has been asked for in this connection is that Easter offerings should be exempted. The hon. Gentleman is going very much further than that, and, if I may say so, is becoming quite illogical.

Mr. Hendry: I should have thought that the right hon. Gentleman would have listened more carefully to what I said.
The proposal relating to Easter offerings was quite unacceptable to many hon. Members because it related only to the Anglican community. So far as I understand, no other denomination in this country has an Easter offering. It was a discriminatory proposal. Various hon. Members of all religious denominations, including Jews and Noncomformists, all supported the proposal in principle, but a great many found difficulty in accepting it in that form because it was discriminatory, and the Churches of which they were members did not stand to benefit. So I have for that reason—logically, in my opinion—widened my Clause to include all denominations, Christian and otherwise, in this country.
I come to the next objection about which I have thought since the subject was discussed in Committee. It is this. I understand that certain Noncomformist denominations in this country do not pay


their clergy directly out of the offerings of their people. What happens in a number of cases, including, I understand, the Church of Ireland, is that a large part of the congregational income, whether from Christian liberality or from the freewill offerings of the people, is sent to a central fund and is disbursed from that fund. That obviously produces a procedural difficulty, but if we can establish as a matter of principle that a small sum, such as £100, or even £50, is permissible for exemption, then it should not be beyond the wit of these Noncomformists and other denominations to retain a small part of the voluntary offerings of the people for this purpose and hand over that small part to their parsons or ministers as part of their voluntary offering. I have tried very hard to meet the cases of all denominations so far as they have come to my notice.
Another objection was raised in Committee, and it was a very sincere objection. It was raised in a very moving speech by the hon. Member for Gloucester (Mr. Diamond). He said that there was another side to this matter and pointed out that a clergyman, possibly a very poor one—in his case, I think, a rabbi, although it does not matter whether it is a rabbi, a priest, or a minister—might feel that he should not accept a benefit that was not available to the ordinary run of mankind, and that he was being given some sort of privilege because of his spiritual position.
I was very impressed by that argument and gave it a lot of thought. I think that I have got an answer to it, and it is very much tied up with the question which I have already been asked, namely, why I decided upon a figure of £100. We who know the Churches and the clergy are well aware that a clergyman has a tremendous amount of outgoing which he cannot claim as an expense for Income Tax purposes. There is a lot of secret benevolence from the clergy in this country. We all know how poor Mrs. So-and-So was helped by the minister, or the priest. It happens every year. We do not ask these reverend gentlemen to keep an account of the few shillings spent on this or that object.
During the Finance Bill debates, we have spoken at great length about expense allowances given to businessmen

and others. Everyone knows that expenses legitimately incurred in earning an income, no matter whose income it may be, are admissible as a deduction for Income Tax, but we surely do not wish to ask these reverend gentlemen to note down in a little book every few shillings they spend on benevolence to Mrs. So-and-So, every bus fare, or the price of every sheet of notepaper that they have to buy. We all know that every clergyman of whatever denomination has expenses of that sort. I should be surprised if the figure of £100 is not related fairly exactly to those expenses which are incurred.
It has been announced that my right hon. Friend is about to retire. He has been a great Chancellor, as I think most of us will agree. I appeal to him to show his greatness in this case. I ask him to take the bull by the horns, admit the principle, and do something for the clergy. The cost would be negligible. It would make no inroads into the country's Budget. In 1957, my predecessor in my constituency put a Question to the then Chancellor of the Exchequer. The reply from the Financial Secretary at that time is reported in HANSARD, Vol. 568, c. 1294, to the effect that the cost of relieving the whole of the stipend income of the clergy from Income Tax would be about £1 million a year.
I am not asking for relief in respect of the whole of the stipend income of the clergy. I am asking only for an infinitesimal part, perhaps one-eighth, or something like that. We are left with a figure of a little over £100,000. Surely, £100,000 or a little more is a small sum to make the people of this great nation the protagonists of God. I appeal to my right hon. Friend to use this opportunity, which may be the last opportunity he has, not to make a vague promise that his successors will do something about it but to bring to reality that part of our daily prayers said in the House when we ask that the result of our councils should be to the glory of God and the maintenance of true religion.

Dr. Horace King: I support the new Clause the Second Reading of which the hon. Member for Aberdeenshire, West, (Mr. Hendry) has so movingly and persuasively proposed. The wicked old priests of the Old Testament used to dig a


fork into the offerings which the congregations made and everything that stuck to the fork belonged to the clergy and the rest went to God.
For over sixty years now, the Treasury and the Chancellor of the Exchequer between them have been acting like Hophni and Phinehas, in the Old Testament. They have been sticking their fork into the offerings which congregations make out of their affection for good clergy and anything that stuck to the fork has belonged to the Treasury. They seem to have acted on the religious belief that congregations should render unto Caesar not only the things which are Caesar's, but a percentage of what belongs to the clergy in question.
I hope that we shall at last make a decision on this question in our debate this evening. All the arguments were advanced in the very long and serious debate we had in Committee, and I believe that the Chancellor offered no effective reply to the plea which hon. Members on both sides made. There may be technical difficulties in separating what both sides have in mind in the various Clauses which have been put down on different occasions, that is to say, the stipend of the clergy, or the living of the clergy, from the voluntary offerings which people make in addition to the regular salary which is paid to a clergyman in any denomination.
Nevertheless, the House has declared over and over again in past years that the Treasury ought to forgo its part of such extra voluntary gifts. I believe that, if the Treasury will accept the principle lying behind the new Clause, it will have the technical skill to separate by a formula which it can devise the stipend of the clergyman from the extra voluntary gifts which a congregation makes.
In most of the requests which have been made to the Chancellor in Committee and during the Report stage of the Bill, important matters of finance have been involved. I can understand the Chancellor's standing by his Budget and his Finance Bill as a whole, but he can concede this without jeopardising in any way their main principles. The sum involved is very small. Neither the right hon. Gentleman nor, I believe, any Chancellor of the Exchequer would have the right to demand, to put it like that, the

loyal party support of his usual supporters in a matter of this kind.
I hope that we can persuade the right hon. Gentleman. If not, I hope that the House will register its own decision on this matter, since the Finance Bill itself is not in question. The total cost can be no more than between £500,000 and £1 million. It can mean very little indeed to the Chancellor, and it will add nothing to the inflationary spiral. It can, on the other hand, mean quite a lot to the poor clergymen whose fortunes we are discussing.
I must add that, if we speak as I hope we shall in this debate and, if need be. we vote as I believe we ought to do, we should, as Christians, make up our minds to tackle the problem which really lies behind this matter, namely, the inadequate pay of the clergy. Anyone who speaks in the debate or votes at the end of it in favour of asking the Chancellor to do something for the clergy but refuses himself to do something outside in the Church to which he belongs will, indeed, be a hypocrite.

Mr. Arthur Tiley: The hon. Gentleman has raised a very important point. Will he look at it in this way? In the light of his last few sentences, would it not be better for the House to send a message from this debate that we should pay our priests, our vicars, our curates, whoever they may be, properly? That is not a matter for us as politicians, or for my right hon. Friend. The message should be that throughout the whole Church our priests should be paid properly. I say that to the hon. Gentleman because he is making a very impassioned and sincere plea, but there is that other side to the argument. If we indulge in this method of legislating, we may tend to take responsibility from ourselves in the congregations.

Dr. King: I did not interrupt the hon. Gentleman in his intervention, because I thoroughly agree with its purport. I hope that, as a result of this and previous debates that we have had, the sentiments that he has expressed will reach outside this House.
But that does not absolve us from solving the problem which we have discussed as a matter of principle year after year. The gifts which congregations make out of their love and affection for


their clergymen ought to go to the clergymen and no portion of them ought to go to the Treasury. The people who make those gifts "cough up" in the ordinary way, as taxpayers, on every conceivable occasion with good grace, but this is not, in their opinion, an occasion when part of what they wish to give to the clergy should be diverted to the Chancellor of the Exchequer.
I add my plea to that expressed by the hon. Member for Aberdeenshire, West, and I ask the Chancellor to make the concession. Let him modify the new Clause in any form that he likes. Let us not have people saying that they will not support it either because it goes too far or because it does not go far enough. If he would concede the principle, and this is why we have already mentioned in this new Clause the limiting sum of £100, then we shall be carrying out what I believe is a right and proper thing, and something about which the House has expressed its opinion over and over again since the war.

5 0 p.m.

Mr. Norman Cole: Briefly, I should like to support the new Clause, and, at the outset, to endorse what the hon. Member for Southampton, Itchen (Dr. King) has just said. It is perfectly true, and if the debate will do nothing else it will underline the fact that all of us in all our Churches get our spiritual leadership much too cheaply. I could put that in bolder and more definite terms, but I will not do so. This debate may, for some of us here and many people outside, underline in our consciences the fact that we do not pay enough for this service, above all services, which we want to have in our lives.
Another point is that we should realise—and I am sure that my right hon. Friend the Chancellor will say this, and I agree with him before he says it—that this will need some sorting out in order to make some kind of equitable arrangement. I hope he will be able to do it, because if we do not go about it properly we might, in trying to solve one problem, create a considerable number of others and be in a much worse state. Nevertheless, the fact remains that something can be done about this. I refuse to believe that it is beyond the wit of the House or people outside to devise

some kind of system to help those whom we most want to help.
Logic has been talked about. I do not believe that this is so illogical as it has been made out to be, because we already do many illogical things, illogical in the sense that they are coloured by human compassion, in our Income Tax legislation. We have marginal relief for old people, various other kinds of reliefs for dependants and people looking after members of their families, as well as other kinds of concessions where we believe there is a human need. Neither in past Finance Bills nor in the present one, nor I trust ever in the future, have we been, or are we being or shall we be, always logical in our tax concessions. In this, above all, I think that if we cannot afford to be a little illogical, then it is a sad day for our country.
My fourth and last point is that I should be very sorry to see the day in this country or in the House when everything we do is coloured and determined only by logic. Indeed, the House of Commons itself does much of its excellent work on the basis of things which are themselves very illogical. I would go further and say that the whole system of democracy is in many ways illogical itself. We all know that it is not the quickest or the best way, from the point of view of speed and logic, of attaining the government of the nation, but it is the right way—the human way, the way that is fair and equitable to all, if not the most speedy way. That is what we ask for in this new Clause.
We do not plead logic or the streamlined efficiency of the new age. We do not think that all people should necessarily have the same thing at the same time, until we can work it all out. I should be surprised to find anybody in this House pleading for this concession elsewhere just because clergymen would be already getting one. Nobody would go that far. We are not pleading this case solely on the grounds that these people ought to have a bigger payment from those of us who go to church and form the congregations—that is something which we all believe must be left to us, and is not a matter for the House—but in order that those who are our spiritual leaders may enjoy this reasonable, proper, even if illogical, human concession from the Chancellor.

Mr. Glenvil Hall: I do not know how many debates on this subject I have heard down the years, but it must be lengthening out now pretty considerably. Up to now, no Chancellor of the Exchequer, in spite of the fact that most moving speeches have been made year after year from every quarter of the House, has found it possible to accede to a request of this kind. I think that we have to bear that in mind, for it is the fact that Chancellors of the Exchequer have found the reasons for not conceding the request pretty considerable, and they still are.
I think they are more formidable now on this new Clause than they were on those we have had previously. Previously, the Chancellor has been asked to exempt Easter offerings, and there was a good deal to be said for that on sentimental grounds. It was a voluntary offering for services rendered by the spiritual head of a particular church to which certain people went, and it was felt, and I think is still felt, by a lot of people that it should not be considered as normal income. The test here which any Chancellor has to take into account is not whether the offering—the amount received—is the same each year, but whether it is recurring. If it happens every year, it is part of the individual minister's income, and that, I believe, is one of the tests, if not the acid test, which any Chancellor has to bring to bear when considering this matter.
If I read this new Clause aright, obviously the allowance is to be made for £100 every year, and, therefore, the assumption is that these offerings will be made year after year and will in time, if not from the very beginning, be looked upon as part of the permanent income of the clergyman or minister, and that is the difficulty which the Chancellor has to get over. Income is income, no matter who gets it, and a clergyman in this direction is in no different position from the rest of us.
There are other arguments, if I may use them, apart from this one, which I think are very much to the point. I doubt if some of the poorest clergymen or ministers would benefit from this new Clause. Their ordinary income is subject to tax and an extra £100 of allowances would probably not mean very much, if anything, to them, because some of them would not pay much tax,

anyway. If I understand correctly the intentions of the hon. Gentleman who moved the new Clause, what he wants to do is to help the poorer ministers and clergymen, and I am not sure that this is the way to do it. The right way is for those of us who go to church and chapel to look after our clergymen and ministers and see that they receive enough to keep themselves and their families and yet allow them to make those charitable contributions to the poorer parishioners or members of their churches who are in need.
At the other end of the scale, ministers or clergymen who have a living which is endowed would not, I assume, get any help from this allowance, because they would not be living, in any sense or shape, on voluntary contributions. Therefore, it will not be universal. The new Clause will not even help those whom the hon. Gentleman who moved it wants to help. It will be something which some ministers would get and many would not, and that is not the way to help them.

Dr. King: I am grateful to my right hon. Friend for giving way. He has said that some clergymen would not get any benefit from this if their main income were derived from a living, but if a voluntary gift were made to such a clergyman on top of his living, he would benefit, surely, from the new Clause?

Mr. Glenvil Hall: No. If it were one that occurred year after year—and, as I understand it, and someone will correct me if I am wrong, the only time when they get voluntary offerings of that kind is at Easter—[HON. MEMBERS: "No."]—I think there is a case for exempting Easter offerings, but I may be wrong about that and do not want to say any more. For the reasons I have given, and for others which I might give but which doubtless others will give, I hope the Chancellor will resist this new Clause.

The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory): I think we all know the depth of the feelings with which my hon. Friend the Member for Aberdeenshire, West (Mr. Hendry) introduced his new Clause. We all respect those feelings.
In Committee on the Bill, in the discussion on the new Clause tabled then by my hon. Friend, I promised that I


would examine the tax position of the clergy between the Committee and Report stages to see whether there was anything that could be done on their behalf. I have in fact given quite an amount of thought to this subject in the last week or two. It would have been quite inexcusable on my part if I had not done so.
I think we shall all agree with what was said by my hon. Friend the Member for Bradford, West (Mr. Tiley) and my hon. Friend the Member for Bedfordshire. South (Mr. Cole) and by the right hon. Member for Colne Valley (Mr. Glenvil Hall) expressing the consciousness of us all that the main trouble here is that the remuneration of our clergy is very low. I am sure that there must be a number of other hon. Members who, as a result of this debate today, feel as I do: I have made up my mind that I will try to carry my responsibilities a little more seriously in this respect as a humble member of the Church of England than I have done hitherto. I do not know whether any others feel as I do, but there is no question about it that the more one thinks about these things and the more one is brought up against these facts the more one is conscious that one does not always get one's priority tight in deciding where help is required.
The question of exempting in whole or in part that part of a clergyman's remuneration which is represented by voluntary offerings, as has been mentioned, has been considered by a long succession of Chancellors over nearly fifty years; not only the question of Easter offerings, but of all voluntary offerings also; and, as has been said, the obstacles have always seemed insuperable to them. The greatest obstacle always has been considered to be the difficulty of discriminating in a manner which is contrary to the general principles of our tax law in favour of the income of one particular calling, however worthy, as against other forms of service to the community. Whatever decision we finally reach in this matter, we must face the fact that to do so, I think, would be to establish a new and far-reaching precedent in our tax law. As I said the other day when speaking in Committee, that is my view. I acknowledged also that that in itself was not entirely conclusive.
The argument that the receipt of offerings by an incumbent for services rendered is not a form of remuneration is, I think, hard to sustain in the light of the facts. Nor does the voluntary nature of the offerings offer any unique basis for special treatment, unfortunately. My hon. Friend the Member for Wolverhampton. South-West (Mr. Powell) put that difficulty very cogently in Committee.
Then there is the difficulty, of course, as I think my hon. Friend recognised in his speech, of ensuring equitable treatment between ministers of different denominations and even between ministers of the same denomination, because according to the best information I have been able to get, I believe that direct voluntary offerings by congregations to the clergy would probably apply to about half of the ministers of religion in this country; and even within this field relief from tax for offerings would operate unequally as between two clergymen both doing equally good work and getting the same total income, one of whom happened to be in a benefice which depended almost exclusively on endowments, the other in a benefice where voluntary contributions played a very large part indeed.
One question which we have to consider is whether it would be fair to tax the recipient according to the source of his income, because the new Clause, of course, would be confined to voluntary offerings made direct to a clergyman by his own congregation, and, as my hon. Friend implied, outside the Church of England there is a wide variety of systems, and many Churches aim at a central pooling of resources from which stipends are subsequently paid out to local ministers. These central funds may be fed, of course, from sources other than the voluntary offerings of members of the Church. Out of these funds there may have to be paid many other expenses besides the stipends—quite necessary expenses of the Church.
5.15 p.m.
In these circumstances, it is quite impossible to say how much of a minister's income comes to him from the offerings of his congregation, and the element of personal relationship, which is so largely relied upon, I think, by those who support the proposal, is of course absent.
These denominations might regard it as unreasonable that spasmodic giving by a congregation should attract a tax benefit which was not available to regular, methodical giving to the needs of the Church as a whole. I am sure that that is one problem we have got to consider.
I am bound to say that in these circumstances, like all my predecessors, I find it extraordinarily hard at present to see a way in which voluntary offerings by a congregation to its own clergyman can legitimately be treated as other than income. If they are income, then it is not easy to find grounds on which, with fairness to others who receive a modest level of remuneration for their services to the community, such income can be exempted from the application of the Income Tax. I do believe that in the course of time we should find it extremely hard to confine the exemption solely to clergymen, however hard we were to try. I wish it were otherwise.
However, I do not intend to leave the matter there. As my hon. Friend the Member for Bedfordshire, South said, this problem does need some sorting out if we are to find a workable solution, and what I propose to do is to consult again representatives of all the main Churches to seek to find some relief which can be given without unfairness to others, and without too fundamental a breach of the principles of our tax law.
Although from what I have said the difficulties are obvious, I shall include in this examination a study of all the various forms which voluntary offerings take in the different Churches to see whether some grounds may come to light which would justify some degree of special treatment.
We will see whether a practicable way of helping clergymen might be to find some means of relieving the burden of Schedule A tax on parsonage houses as far as that falls on the incumbent. It might be worth investigating. I think it is possible something could be done there. In this respect, Schedule A tax, many clergymen of the Church of England are at present at a disadvantage compared with other ministers whose houses are regarded as in occupation of the Church and, therefore, exempt.
I am anxious that clergymen should avail themselves to the full of the tax allowances which are available in regard to expenses necessarily incurred in the performance of their duties. Here again I must adhere to the general principles of the law, but I understand that it is generally accepted that the law is at present interpreted generously in regard to clergymen's expenses, and that every type of expense which a clergyman could reasonably claim to fall within the expenses rule is in fact allowed. There may be a number of ministers who are not aware of the expenses which may be charged against taxable income. I should like to make sure that our present rules do, in fact, cover all appropriate and relevant expenditure and are generously interpreted, and if they are not, if there are any other expenses which could legitimately be brought within their scope, then we will consider what we can do.
The consultations on these matters will be entered into with a real hope of producing some positive result. I hope that in these circumstances my hon. Friend, recognising the difficulties with which I am faced in finding a fair solution and my anxiety to find one, will not press this particular proposal, which, I feel, in the light of our present evidence, really would not do the justice which we are all out to try to find a way of doing.

Mr. A. V. Hilton: I regret that the Chancellor is unable to accept the Clause, but I am glad that he has not closed the door in our face and that he has promised to consult the various religious denominations on the subject. He said that he hoped that he might be able to find a way whereby help could 'be given to the people whom we have in mind.
I as a Methodist wish briefly to speak in support of the Clause. At the moment the Methodist Church is in conference and my hon. Friend the Member for Cardiff, West (Mr. G. Thomas) has just been elected vice-president of that conference. It is the first time that a Member of Parliament has received this honour. I am sure that the Methodist conference will receive what the Chancellor has just said with pleasure—the fact that he has not closed the door on the suggestion.
It has been said on a number of occasions during this brief discussion that ministers of religion are not properly paid. That is true. I personally know many ministers, some of the Church of England and some of the Free Churches, who are receiving no more in remuneration than what ordinary labourers are getting. As the hon. Member for Aberdeenshire, West (Mr. Hendry) said, it is true that theirs is not a job but a calling, and everyone in the House, whether he supports the Clause or not, respects the wonderful work that ministers of religion are doing.
Even if the Chancellor were to accept the Clause, ministers of my own Church would be unlikely to benefit from it to the same extent as ministers of some other denominations, but even so, I still think that what the Clause proposes is a move in the right direction, and I only wish that it could have been accepted. Help for the clergy is needed now. The hon. Member for Bradford, West (Mr. Tiley) intervened to say that we as members of on. Churches ought to pay our ministers properly. I agree with that, but it is a fact, as we all know, that it is getting more difficult to do so all the time, in view of the unfortunate decline in congregations. We in the Free Churches find it particularly difficult to do so at the present time.
At the Methodist conference to which I have already referred it is suggested that we should pay our ministers more. I know from experience that that is going to be very difficult, but, despite the difficulty, we shall set about it and try to honour our obligation.

Mr. Diamond: Will my hon. Friend explain how, if members of a congregation are finding it more and more difficult to put their hands into their own pockets in order to pay their ministers adequately, it can be right that they should put their hands, through the Treasury, into the pockets of their fellow-citizens in order to pay the ministers of their own congregation?

Mr. Hilton: I think that my hon. Friend has got it wrong. The money is, in fact, coming from the same pockets, because the people who regularly attend our respective churches and regularly give to collections for their maintenance

are the people who on any special occasion dip into their own pockets, and, sometimes, dip a bit deeper.
The point that I am trying to make is that it has always been difficult for the Free Churches in particular, which are self-supporting, to maintain their ministers, and with the unfortunate decline in congregations at the present time, about which many of us are so sorry, it is becoming increasingly difficult.
I intervened in the debate only to say a few words about the Clause and to thank the Chancellor for giving some ray of hope that in the not too distant future he may, to some extent, be able to help the body of people about whom we are speaking and who are doing such very good work for the benefit of the people of this country.

Mr. Glenvil Hall: May I interrupt my hon. Friend to point out that the Chancellor has given much more than a ray of hope? He has indicated that ministers will now be informed that they can claim certain expenses, one of which is for the use of a room with heating and lighting in their own houses. That, in most cases, will come to more than £100.

Mr. William Yates: I think that the speech of my right hon. Friend the Chancellor was encouraging, especially his reference to the advice to be given about the recovery of tax and also about Schedule A. However, I am in sympathy with the Clause and with the way in which my hon. Friend the Member for Aberdeenshire, West (Mr. Hendry) moved it and the way in which it was so ably supported by the hon. Member for Southampton, Itchen (Dr. King).
There seems to be some idea that we cannot alter a principle. Who says that we in the House of Commons cannot alter a principle if we decide to do so? Who is telling us that the House cannot alter tax principles if it so desires? This is a new theory and the sooner it is debunked the better. Anyone who says that the House of Commons cannot—

Mr. Amory: I do not know whether my hon. Friend is referring to me, but I did not make that statement.

Mr. Yates: I was not referring to my right hon. Friend. I would not dream of doing so.
This matter was discussed quite a lot in Committee. My right hon. Friend the Chancellor says that certain people receive a special form of income and that we cannot make an exception in their case. We must not make exceptions for special classes of people who receive some special form of income.
What about my disability pension? Do I pay tax on that? Certainly not. That is part of my income. Is that not a special class? What is all this business that ministers of the Church should not be regarded as being in a special category? What are those people who take this view talking about? They run away with the idea that because something is logical or because it is a theory or a practice it should not be varied. We in this House decide what laws we shall pass. I should have thought that on this occasion it might have been wiser to say that the proposal in the Clause was one which my right hon. Friend should commend to his successor.
I do not wish to take up more of the time of the House in going into the matter, but it seems, perhaps, that the people who ought to be setting an example are those in charge of the direction of the affairs of the country. I should have thought that the high Court of Parliament might in its wisdom have decided to try to produce a modified Clause on the lines suggested.
In view, however, of what my right hon. Friend has said and of his suggestion concerning relief of tax, I would suggest to my hon. Friend the Member for Aberdeenshire, West that he might consider withdrawing the Clause on that undertaking. I would point out, however, that if an undertaking of the nature which has been given today by my right hon. Friend had not been forthcoming, I for one would certainly have voted for the Clause.

Mr. Hendry: In view of what my right hon. Friend the Chancellor has said, and the opinions expressed by certain hon. Members associated with me, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(SUPPLEMENTARY PROVI- SIONS AS TO SS. 20 TO 25.)

If—

(a) a person furnishes to the Commissioners of Inland Revenue particulars of a transaction or transactions effected or to be effected by him being a transaction or transactions which but for the provisions of this section might fall to be dealt with under any of the provisions of sections twenty, twenty-one, twenty-two, twenty-three, twenty-four, or twenty-five of this Act; and
(b) the Commissioners are satisfied that the transaction or transactions as described in the particulars were or will be such that they ought not to be dealt with under the provisions of any of those sections

the Commissioners shall notify the said person accordingly and where such a notification has been given under this section none of the provisions of the said sections twenty, twenty-one, twenty-two, twenty-three, twenty-four, or twenty-five shall apply to him in respect of that transaction or those transactions.—[Sir C. Black.]

Brought up, and read the First time.

5.30 p m

Sir Cyril Black: I beg to move, That the Clause be read a Second time.
The point covered by this Clause is comparatively simple and straightforward. Whatever differences of opinion we may have about this year's Finance Bill, there will be no difference of opinion that Clauses 20 and 25, with which this new Clause seeks to deal, are extremely complicated and very largely incomprehensible to the layman. Indeed, many lawyers with whom I have discussed them have been unable to express definite opinions on matters of detail as to what they seek to achieve.
Many years ago, Mr. Gladstone laid down certain criteria regarding sound tax principles. I have not been able to trace his exact words, but I believe that one of his criteria was that taxes should be of a character that would make them easily intelligible to the taxpayer. If that be the case, we have certainly moved a very long way today now from the principles that operated in Mr. Gladstone's day. Any hon. Member who claimed to have a complete understanding of Clauses 20 to 25 would, indeed, be a very bold man.
The new Clause in no way challenges any of the proposals contained in Clauses 20 to 25. We may or may not agree with those Clauses, but their merits are in


no way affected by this new Clause, the purpose of which is to enable perplexed potential taxpayers, who are in doubt as to what Clauses 20 to 25 mean, to ascertain in advance from the Inland Revenue what would be the tax consequences of certain transactions.
There is a precedent in the present Finance Bill for that procedure, because in reference to Clause 26, we find in Clause 27 (9) words that very nearly accord with the words to be found in the new Clause. What I seek to do is to apply to Clauses 20 to 25 the procedure that is applied by Clause 27 (9) to Clause 26. That seems to be an eminently reasonable thing to do. There is a precedent for doing it, and I find it difficult to understand why the procedure should be regarded as relevant to Clause 26 but, apparently, not relevant to Clauses 20 to 25. Therefore, in the interests of clarification, I hope that my right hon. Friend may be able to advise the Committee to accept the new Clause.

Mr. Barber: As my hon. Friend the Member for Wimbledon (Sir C. Black) has said, the purpose of the new Clause is to provide that any person may furnish the Commissioners of Inland Revenue with particulars of transactions effected by or to be effected by him that might fall under any of the provisions in Clauses 20 to 25, with the object of obtaining a clearance. I am certainly the first person to admit to my hon. Friend that these are very complex Clauses, and I have a great deal of sympathy with the object he has in mind.
My hon. Friend has very skilfully drafted this Clause as a shortened version of the provisions about application for a clearance under Clause 27. I am sure that almost every hon. Member will now be familiar with the provisions of that Clause, but, in order to explain the position, I must, very briefly, state once again certain of the matters contained in it.
Clause 27 deals with transactions in securities giving rise to tax advantages and has effect—and these are the important words—unless the person concerned
… shows that the transaction or transactions were carried out either for bona fide commercial reasons or in the ordinary course of making or managing investments, and that none

of them had as their main object, or one of their main objects, to enable tax advantages to be obtained, …
In that context, provisions for a clearance by the Commissioners of Inland Revenue are clearly appropriate. I agree with my hon. Friend that Clause 20 also lends itself to provision for a clearance in so far as under subsection (2) of Clause 20 its operation turns upon the question of whether or not the Commissioners having jurisdiction in the matter are satisfied that after a sale of shares all trading stock belonging to the company at the time of the sale has been or will be disposed of in the normal course.
I should say that since Clause 20 (2) places the responsibility for deciding the matter on the Income Tax Commissioners, this new Clause would hardly be satisfactory taken on its own because, as Clause 20 is at present drafted, there is no room to give the Commissioners of Inland Revenue any power in the matter. I agree, however, that there is much to be said for the view that a person proposing to sell shares ought, if possible, to be able to ascertain where he stands before carrying out the sale.
It is with that in mind that there is a Government Amendment to Clause 20 which will be moved later, in combination with an earlier Government Amendment to the Clause, which will introduce the necessary machinery. This machinery will enable the intending vendor, together with the proposed purchaser of the shares, to approach the Commissioners to get a clearance if the Commissioners are satisfied that the trading stock will be disposed of in the ordinary course, as required by Clause 20 (2).
There are two points that are important. This provision for a clearance will also run for a sale of shares in a holding company which, under Clause 22, falls to be treated as a sale of shares under Clause 20 (1). It will also run in relation to a company that falls to be treated as within Clause 20 by reason of the special provisions of Clause 21, which, as my hon. Friend will remember, relate to a company which has put up, or is putting up, a building.
I hope my hon. Friend will agree that what I have said goes quite a long way towards dealing with the point that has, rightly, been concerning him, but I


should add that provisions for a clearance in relation to other provisions mentioned in the new Clause are—as I think that he will agree on reflection—not appropriate. Apart from the question whether or not trading stock will be disposed of in the ordinary way after a sale of shares, the application of the Clauses must depend upon whether, on the facts of the case and on the proper interpretation of the law, the taxpayer falls or does not fall within the provisions. In the event of dispute about any such question, it should be resolved in the ordinary way by appeal to the appropriate body of commissioners, just like any other dispute about a taxation matter.
I hope that what I have said about the Amendments which we propose to move later will convince my hon. Friend that we have done all we can to meet his point in providing for a clearance in cases where we consider it to be appropriate.

Question put and negatived.

New CIause.—(MAINTENANCE PAYMENTS TO BE TREATED AS EARNED INCOME.)

(1) In subsection (2) of section five hundred and twenty-five (meaning of "earned income") of the Act of 1952, at the end of paragraph (c) there shall be inserted the following:—
(cc) any small maintenance payments, as defined by section two hundred and five of this Act, and any payments which, but for their amount, would be such small maintenance payments; and

(2) Section two hundred and seven (Duty of court to give information as to small maintenance orders) shall have effect in relation to any payments mentioned in this section as it has in relation to small maintenance payments and the expression "small maintenance order" shall, for the purposes of this section, be construed accordingly.—[Mrs. Castle.]

Brought up, and read the First time.

Mrs. Barbara Castle: I beg to move, That the Clause be read a Second time.
This is a Clause which attempts to deal with a point of hardship at present endured by a considerable body of deserving women, but it also raises an important point of principle which, I believe, is unanswerable. The Clause seeks to give the benefit of the two-ninths deduction of earned income relief to every wife who is separated from her husband and receiving a small maintenance payment from him.
I was very surprised, and so were a number of my constituents who are affected by the present position, to find that such payments are ranked as the unearned income of the wife and, therefore, are taxed as such without the benefit of earned income relief. A number of separated wives, both in my constituency and elsewhere, have written to me to complain that these small maintenance payments are income which is the husband's contribution to the maintenance of the wife which he would have to make in any event if she were still living with him and which she often needs to maintain the home, to which his children are entitled—often, she is looking after the children—and which is generally the family home, which he has deserted and which she is left with the burden of maintaining.
Therefore, these small maintenance payments ought not to be taxed as though they were some kind of investment income which the wife had not earned. It is ironical to class these small maintenance payments as investment income. They would be more appropriately described as disinvestment income, because they are the product of the failure of the wife's investment in marriage. She is awarded the money by the court to help to maintain the family home which was not broken up by her.
Therefore, from the purely human point of view, it seems an outrage to these women, who have faced the breakup of marriage and who have had to carry on with the family life and the family home with no companionship from the husband and with simply these small payments from him, suddenly to find that this money, which they regard as part of the ordinary housekeeping money, which they were getting before the home was broken up, is classified as investment income and is taxed as though it were unearned.
5.45 p.m.
I want, at this point, to come to an important technical side of the matter. In the Clause, I am not asking for any form of double tax relief. What happens at present is that these small maintenance payments are mostly paid by the husband out of earned income. Since, however, under the present law, these small maintenance payments are regarded as a charge on his income,


they are deducted from his income before the earned income relief is assessed upon it. What this means under the existing law is that nobody gets earned income relief upon this slice of the man's income which goes to the wife for her maintenance. That is the point of principle to which I want particularly to draw the attention of the Chancellor of the Exchequer.
Surely, this situation is quite wrong. Why should a slice of the man's income not be entitled to the normal tax relief that everyone else would get? Why should the benefit of it go to the Chancellor instead of to a woman who has to face life's struggle under additional difficulties? Clearly, the point of principle is that somebody should get the legitimate earned income relief on this slice of the man's earned income.
I maintain in the Clause that it is the wife who should get it, because the small maintenance payments come to her as a form of housekeeping money which she would have got had she remained in the man's companionship. It is most unfair that the break-up of the home, which, in the eyes of the law, is not the fault of the separated wife—that is, why she has the maintenance payment—should mean that she is deprived of her right to treat these payments as a form of housekeeping money.
I am well aware that the Chancellor may argue against me that same, at least, of these separated wives are already covered by the small income relief, which is the same in extent as the earned income relief and is available, I understand, to anybody with a total income of less than £300 a year, regardless of the source from which it comes—regardless, that is to say, of whether it is earned income or investment income.
That does not meet the principle involved, however, because it is, clearly, only wives with a very small income indeed who get the benefit of this. If the Chancellor brings this argument in aid in resisting the Clause, he will be saying that he is prepared to help only the separated wife who is living in something near to penury. I say that the separated wife ought not to have to be living in very stringent circumstances before she gets this tax relief which is equivalent to the earned income relief figure.
Even bearing this concession in mind in regard to the small income relief, the present position is that if the separated wife goes out to earn, She is immediately penalised—and, of course, the large majority of these wives have to go out to earn. All that the small maintenance allowance means to this class of separated wife to whom I am referring is a little bit of help. In a large number of cases, it is simply not enough to live upon and the separated wife has to go out to earn to keep the home together, particularly when children are involved. She certainly has to go out to earn if she wants to keep anything like the same domestic standard that she had looked forward to enjoying all her life when she entered into the marriage contract, which I repeat she did not break.
I should like to give an example of how things work at present. The separated wife going out to work might earn £6 a week, a typical woman's wage and certainly not a handsome one. In addition, she might receive 30s. a week maintenance allowance from her husband. In the present situation the small income relief will cover her earnings, but not her maintenance allowance in this case and that means that she would have to pay tax on the 30s. as if it were an investment income.
One woman wrote to me on these lines:
I have a court order of £1 10s. per week made in 1944 owing to my husband's desertion and adultery with the woman with whom he still lives. As I had a son 4½ years of age I was compelled to do what work I could obtain and give him a home. It has been a very sore point with me to have to pay Income Tax on such a small allowance.
Assuming that in this case she had earned £6 a week, that 30s. maintenance payment which she received under a court order would be treated as investment income or unearned income and taxed accordingly.
Under my proposed new Clause what would happen in this case would be that the woman would receive in future the two-ninths earned income relief on her 30s. a week court order payment, which would be some small help. I do not exaggerate the amount of help that it would give, but this woman is in a situation in which even a few pounds of tax relief a year is important. It might make all the difference between having a


holiday and not having one or having a new dress or not having one, or buying something for the home which at the moment she cannot buy owing to sheer financial stringency.
This proposed concession is very modest. It does not go as far as I should have liked. I should have liked to have seen more done for the woman, but I have to put my request in this modest form to keep it within the confines of the principle which I have already stated, namely, that the 30s. she gets is something which has not under the present law been given the benefit of the earned income relief at all—the Chancellor has pocketed the relief.
I would ask the right hon. Gentleman to see that, in future, the separated wife shall have that relief. I have put my request in this modest way because I believe that the Chancellor will admit that the principle which I have outlined is unanswerable and I am confident that he will accept my Motion.

The Solicitor-General (Sir Jocelyn Simon): I believe that this is the first time that we have had the pleasure of listening to the hon. Lady the Member for Blackburn (Mrs. Castle) on this Finance Bill. I know that the House will want to recognise her persuasive and, indeed, moving speech. The hon. Lady said that her case was unanswerable in point of principle, but, as so often happens in our debates, even the most unanswerable point receives some sort of answer. I shall certainly try to show why her new Clause is not acceptable and how, indeed, it runs counter to the tax principle which is pretty fundamental to this part of the code.
The hon. Lady moved the new Clause in very human terms. I can tell her that I have tried at times to put forward the case for these women. A few years ago I urged an Amendment to the Finance Bill which would make greater provision for the woman who is dependent on small maintenance payments, and the Amendment was accepted in a subsequent Finance Bill. But when it comes to this point I am bound to say that the proposal is not acceptable.
The hon. Lady puts her case in two ways. First, on the ground that these are women who are suffering hardship. I think that that is inherent in their posi-

tion. They are women whose marriages generally have broken up and, almost ex hypothesi, through no fault of their own. Their position must obviously excite compassion. But recognising that this is not a sufficient case for asking for a tax definition in their favour, the hon. Lady goes on to say that she is not asking for double tax relief because the small maintenance payment is deducted from the husband's income before arriving at the figure on which he is entitled to earned income relief.
This is so, but the reason why it is so is that it is deducted from his earnings, and on that part of his earnings he does not pay any tax at all. It is not considered to be part of his income. In fact, the small maintenance payment is really only a matter of machinery and, as machinery, it is very much to the advantage of separated wives who are living in small circumstances. It means that they do not have to wait to recover a tax certificate from a feckless or ill-intentioned husband and then reclaim the tax. It means also that the whole amount of the weekly order by the court is handed over to the wife. It is not part of the husband's income, but it is taxable in her hands. Even where the small maintenance order is not strictly a maintenance order the same result is arrived at in that the sum is not taxable in the hands of the husband but is taxable in the hands of the wife.
I take it that for that reason in the new Clause the hon. Lady does not limit the provision to small maintenance payments as strictly defined. The point I make is that it is purely a matter of machinery. Whether it is a small maintenance payment or not within the meaning of the Income Tax code, the result is that the weekly sum awarded by the court is deductible by the husband from his income before that income is assessed to tax, and he does not receive the earned income relief on it because he is not taxed on it.

Mrs. Castle: Surely the hon. and learned Gentleman, in saying that the husband is not taxed on it, is admitting that nobody gets tax relief on it. He says that it is done that way because it is a quicker means of ensuring that the wife gets the money, but my answer is that the present arrangement makes the wife pay for an act of convenience. I am not asking that this sum should be


tax-free. I am saying that the Government can secure their administrative convenience but that they should give tax relief at the point where the tax is paid, namely, by the wife. What possible objection can there be to that?

6.0 p.m.

The Solicitor-General: I was coming on to the objection to that, but I wanted to deal with the hon. Lady's point of departure and show that the reason why the husband does not get earned income relief on this part of his income is that he does not pay tax on it at all. It is not considered as part of his income for tax purposes.

Mr. Douglas Jay: The hon. and learned Gentleman is not suggesting, is he, that it is a mere matter of machinery whether or not this proposal is accepted? Does he agree that if my hon. Friend's proposal were accepted and earned income relief were granted on the income received by the wife, the wife would be better off in substance—that it is not just a matter of machinery, that it would leave the husband just as he was and that the wife would receive the relief? Is that correct?

The Solicitor-General: That is absolutely true. I do not think I said anything which would have implied the contrary. If I did, it was certainly inadvertence.
The real objection to the proposal is that this is not earned income in the sense for which relief is made, but earned income relief is given on income which is derived directly or indirectly from the personal exertions of the tax- payer—such things as the wages and salaries earned by those who are part of the working population, pensions in respect of past services and business profits earned by professional men, individual traders and so on.

Mr. Houghton: Did the hon. and learned Gentleman say "pensions"?

The Solicitor-General: If I called it a "pension" I should be using terms extremely inaccurately. "Pensions" so far as earned incomes relief is concerned are emoluments which are given in respect of past services whereby an income has been earned by personal exertion, and it is really playing with words to say that a housekeeping allowance paid

to a wife is earned income in that sense or analogous to a pension.
Consequently, with very great respect to the hon. Lady, when she puts this as a question of principle I say that the approach is wrong in principle because maintenance payments, whether small or otherwise, are not earned by the exertions of the recipient. Apart from the inherent case of personal hardship, the woman concerned has no equitable claim to earned income relief in the computation of the tax liability which falls on her.

Mrs. Castle: Would not the hon. and learned Gentleman agree that it is playing with words to call this money investment income?

The Solicitor-General: I have never called it investment income. It was the hon. Lady who did so. It is quite wrong to equate unearned income with investment income. There are many types of income which do not rank as earned income which are not investment income. For example, sums paid by way of annuity under a deed of covenant are unearned income and not earned income, and yet they are certainly not investment income. One can think of a case which is very close to the cases which the hon. Lady has urged on us and which is not covered by her proposed Clause. We might have a wife who, instead of having a court order, had a payment under a deed of separation. That is not earned income, and it is certainly not investment income either. I should have thought that that case might be every bit as much deserving in the human sense in which the hon. Lady urged the proposed Clause as some of the cases which she has in mind. Also, in some of the cases of a deed of separation one cannot start on the hypothesis that it is a wronged wife.
I come back to the point that this is not income which is earned by the exertions of the recipient, and, therefore, it is not earned income. There are, after all, many cases of people who are living on small income derived from investment, derived from covenant, derived from deeds of separation, and so on, to which the general arguments which the hon. Lady urged are equally susceptible. But one comes back to it in the end that in none of those cases, any more than in this, is it earned income in the sense that it is got by the personal exertions of the recipient. One must look at the facts as they are.
The hon. Lady mentioned that there is an alternative relief in the case of the very poorest of the type of persons who would be beneficiaries under the proposed Clause. She fairly put the case of the small income relief. I do not want to over-emphasise that point. However, it means that an equivalent relief is available to those who have most to bear in the field which the hon. Lady has in mind. In addition, in the case of elderly separated wives there is the age relief of two-ninths of earned income—on any unearned income of a taxpayer aged 65 and over—and there the limit is £800 and not £300.
So in the end, although the hon. Lady has, as I think the House will appreciate, urged her case with great force and with feeling, it is unacceptable. This is not earned income. It is not in the nature of earned income. If we want to help people in this position we ought to do it in some other way.
In conclusion, it has been my experience that the courts take the tax position of a separated wife into consideration in fixing the amount of the order. My experience is that that has been increasingly so as the amounts that can be awarded by courts of summary jurisdiction have increased. Consequently, the tax liability may be an important consideration.

Mr. Diamond: I feel that the hon. and learned Gentleman has touched on a very bad point. The case that my hon. Friend has made is simply that of the revenue versus the wife. What the hon. and learned Gentleman is talking about is the court's decision as between husband and wife. This cannot possibly affect the fact. Whatever the court decided could not affect the pocket of the Revenue. My hon. Friend was properly saying that the Revenue should cough up and that the wife should get the benefit of it.

The Solicitor-General: In spite of what the hon. Gentleman says, I think that the point is a valid one. In deciding how much a wife ought to have for her support in the circumstances, the court will consider the tax position of not only the wife but also of the husband. One comes back to the point that whatever order is made in favour of the wife, whether a small maintenance order or not, it is deductible from the husband's

gross income before assessing his liability to tax. For those reasons, I regret that I cannot advise the House to accept the proposed Clause.

Mr. Houghton: That is a very disappointing reply. A few moments ago we listened to very moving pleas by hon. Members opposite to the Chancellor of the Exchequer to put aside logic and consider the deep feeling in various parts of the House about the taxation of voluntary offerings given to clergymen and ministers of religion. The Chancellor announced that he was giving further consideration to the matter and would consult representatives of the various denominations in the real hope that some way would be found of giving acceptable relief in that direction.
We know that there are difficulties about the proposed Clause in logic, but there is a very human side to it which my hon. Friend the Member for Blackburn (Mrs. Castle) ably described to the House. I would like to congratulate her on her entry into Income Tax debates. We have listened to many moving and, very often, provocative speeches from her, but this is a new rôle for her. I am inclined to ask where she has been all this time. I am sure that we will look forward to her participation in debates on these matters in future. It seems that she can touch some chords in the heart of the Solicitor-General that the rest of us cannot touch.
I want to discuss with the hon. and learned Gentleman these proposals on the more practical ground of taxation. The hon. and learned Gentleman says that this is not earned income. Earned income is what the Income Tax Act says is earned income, and this new Clause proposes to add to the definition of earned income. A learned judge once reminded the court that Income Tax is, after all, a tax on income, but the truth is that income for the purpose of the Income Tax Act is what the Income Tax Act says is income, and no other income is taxable. I think that we can, therefore, base our approach to this matter on the quite extraordinary traditions of our Income Tax, which apply definitions to certain types of income which are taxable and leave aside other income which is not.
In asking what is earned income, the reply is: what this House says is earned


income is earned income. Already, in the past, the House has departed from the strict interpretation of earned income as being by the exertions of the individual by conceding earned income relief to such income as pensions.
I remember the time—if my right hon. Friend the Member for Battersea, North (Mr. Jay) will forgive me—when he argued that a retirement pension paid to a wife by reason of her own contributions was not earned income. I contended that it was. Eventually, the House accepted my view and the pension of a wife paid by virtue of her own contributions is now earned income. It is not necessarily the product of her own exertions, but we decided that it would be unfair and unreasonable to allow the husband's retirement pension to be treated as earned income, and the wife's pension in her own right as unearned income. We can decide that these maintenance payments shall be treated as earned income if we so will.
Is such a payment worthy of inclusion in the definition of earned income? This is housekeeping money one stage removed. If the woman were at home, performing the wifely duties which she has every desire to continue to do, this money would be paid Ito her for housekeeping, and the husband would receive earned income relief. He spurns and deserts the family home, however.
It may be argued that when this money is passed to her under the compulsion of the court it is for maintenance of the home as housekeeping money one stage removed. But the husband exercises his right to regard this payment as a charge on his income. Clearly, if he does so, he pays no tax on it. Nor does the Inland Revenue concede earned income relief on this earned income. It is charged against his income. He does not receive earned income relief from it. He passes money to his wife; she does not receive earned income relief on it. Therefore, on a parcel of earned income, the Inland Revenue escapes its obligation to concede earned income relief. That is a tenable argument and will stand up just as straight as many justifications for tax changes and reliefs in the past.
6.5 p.m.
The other justification for this proposal is that it is restricted to small main-

tenance payments. These are made without deduction of tax and are directly assessable on the wife, subject to her own personal liability to tax. A Clause which has, I believe, never been mentioned in the course of our discussions on the Bill, is Clause 39, which extends the scope of the concessions given to small maintenance payments up to a maximum of £7 10s. That is a valuable concession to the wives concerned because it relieves them of the obligation, as the Solicitor-General said, of claiming back tax deducted from the payments made to them by the husbands.
The restriction of this concession to small maintenance payments ensures that the more lavish provisions for wives by the well-to-do—who, perhaps, can enjoy the luxury of separation more easily than poorer people—will not qualify for earned income relief. I see no reason to object to that discrimination in favour of the small maintenance payments, because the crux of this argument is that they are virtually housekeeping payments for the maintenance of the home and are not payments to maintain wives in some high standard of living. They are basic to the life and happiness of a wife who has been deserted by her husband.
Had we been given some hope that this matter would be considered in the spirit in which the Chancellor of the Exchequer gave an undertaking a short while ago, we would have felt differently about this, but there is a strong case here for more sympathetic consideration and we believe that something should be done—not necessarily, perhaps, strictly on the lines of this proposed Clause. There is only one way in which our disapproval can be expressed in concrete fashion in the House, and so I beg my right hon. and hon. Friends to divide the House.

Mr. James Dempsey: I have been trying to follow the Solicitor-General's arguments, but it is difficult at times to understand the reasons for those that he has so far adduced. We are dealing here with a great social problem, as I am sure he appreciates. Countless thousands of wives living with their husbands receive only housekeeping allowances. It is only husbands who receive this earned income relief. I wonder why these payments should be treated as unearned income.
The Solicitor-General referred to income which has been obtained as a result of personal exertions, but only recently I listened to an hon. Member opposite talking about disability pensions which were disregarded. Those pensions are earned income—they have been earned as a result of sacrifice on the battlefield, or in our industries. Yet it seems that they are designated as unearned income. I find myself in great trouble trying to determine what is earned income and what is not.
We have just decided that an Easter offering to a minister will be treated as earned income and taxable as such. In this case we are discussing a person who, through no fault of her own, finds herself in certain circumstances. Will the Solicitor-General explain to what extent a so-called maintenance allowance will be included in such a person's income for Income Tax purposes?
Let us take the example of a woman in this situation who is compelled to find employment and whose wage is not sufficient to warrant taxation, but whose aggregate income, if the so-called maintenance allowance is included, would rank for Income Tax. Would the maintenance allowance not be included as earned income in that case? One recognises the validity of the argument for regarding the pension of disabled people as earned income or disregarding it completely. They have made a physical sacrifice in the country's service. Why should not a similar decision be made in this case?
The sort of case which I have just instanced is not hypothetical and many similar cases can be found all over the country. The Solicitor-General spoke of maintaining taxation principles, but already various incomes are given special treatment or are ignored. In the circumstances which I have outlined, will a maintenance allowance be treated as income for Income Tax purposes or not? If the answer is in the negative, there may be some argument for the hon. and learned Gentleman's case, but if it is possible that the allowance will be taxed then the hon. and learned Gentleman should reconsider the whole position. It is reasonable, when a person is not responsible for the state of affairs which we are considering and when she is

receiving a form of compensation for something denied to her, that she should be given special consideration.

Mr. Jay: May I give a second chance to the Solicitor-General? If he wants to meet the substantial argument put by my hon. Friend the Member for Blackburn (Mrs. Castle) and, at the same time, preserve the taxation principles in which he is interested, will he consider the following suggestion?
The hon. and learned Gentleman admits that in the case of age relief we give persons who are 65 years old and more a two-ninths earned income relief. In that case, we do not say that the income is earned income, but we treat it as if it were and we apply that arrangement up to a maximum of £800 a year. In the case of the small income relief, of which the hon. and learned Gentleman also spoke, again we do not necessarily say that that is earned income, but we treat it as if it were by applying the two-ninths relief up to a maximum of £300.
That applies to the maintenance payments of which we have been speaking. Unfortunately, however, in that case the maximum is not £800, but £300. Would it not be possible in the case of maintenance payments to say that the two-ninths earned income fraction shall apply up to a maximum not of £300, but of £800, which is the maximum which applies in the case of age relief?
The hon. and learned Gentleman would be doing no more violation to tax principles than we already do by approving of the age relief and the small income relief, but we would be doing something useful by saying that these people are in a position which is not fundamentally and humanly different from that of those who are 65 and more and we would also be meeting the need without considerable loss of revenue.

Mr. Diamond: Will the Solicitor-General consider a further argument? I am sure that from his deep knowledge of these matters outside the House, and his great knowledge of these fiscal matters, he must be very moved by the arguments put forward and not controverted.
Will he consider an aspect which must be resting heavily on his conscience? At the moment, perhaps, unwittingly, he is taking an unfair tax advantage from


women in these circumstances. I do not suppose that that is his intention. He is getting that unfair advantage in that this money, which is supposed to be a simple transfer from husband to wife, would have attracted tax at a certain rate if the two had been living together—the standard rate, say, less earned income relief. Yet, when the money is transferred as a matter of administrative machinery the wife pays tax at the higher rate, namely, the standard rate, for example, or the highest possible rate under the provisions, without deduction of earned income relief.
It is conceivable that there are many cases in which the highest rate of tax would be payable and the only way to make sure that it is not paid is to accept the proposal of my right hon. Friend the Member for Battersea, North (Mr. Jay)—at any rate, for consideration—if not up to the maximum of £800 which my right hon. Friend mentioned, then at least to the maximum of the earned income relief which would have been granted had it remained the income of the husband.

Dr. Edith Summerskill: It is very difficult to understand the Solicitor-General in this new guise. Before he was raised to his exalted position he seemed so receptive to these ideas. He seems to be a Jekyll and Hyde and I am very sorry to see this change, now that he is on the Front Bench, in someone who has studied the problems of women in adverse circumstances and who should not have to be taught these simple lessons from this side of the House.
I appreciate his refusal to acknowledge that this money is not unearned income in oases where the woman concerned is well off and living in a good deal of comfort, with no hardship, but how does the hon. and learned Gentleman's logical mind address itself to the problem in the lower income groups? There a woman may receive a sum of money for which, in return, she scrubs, cleans, makes clothes and does all sorts of things in the household, for which, as the hon. and learned Gentleman knows, people have to pay very highly today. Why does he not agree that that important and necessary work which she does in return for the money is earned income?

6.30 p.m.

Mr. Leo Abse: I would have hesitated to intervene in a debate on Income Tax matters if it did not also touch upon matters with which we were dealing to some extent last week, and in connection with which I heard the hon. and learned Gentleman adopt an entirely different attitude. In his case a metamorphosis has taken place from a matrimonial lawyer last week to an Income Tax lawyer this week. Last week, the hon. and learned Gentleman told us that this maintenance, which could be obtained by going to the law courts, was essentially a housekeeping allowance, and he made it perfectly clear that he would resist any attempts we made to obtain orders under circumstances which would mean that the magistrates would be determining the housekeeping allowance. Now it is not to be treated as such. The housekeeping allowance of last week has suddenly become unearned income.
I would not have intervened, either, if it had not been for the fact that the Solicitor-General indicated—and my hon. Friend the Member for Gloucester (Mr. Diamond) was correct in his interruption—that it was the practice in the courts to examine the Income Tax position in these matrimonial cases. That is far removed from my experience. In fact, when the courts have to determine the amount of these small payments they have to direct their attention to many matters. They direct it to the rent of the house, to the amounts paid on hire purchase, and to rates and gas payments. They very often go into complicated figures to find out how much the man must have to survive as an earning machine, and how much the wife needs.
Is it seriously suggested that at the end of the hearing of such a case either the clerk or the magistrate is able to give his full attention to the Income Tax position? I doubt whether either clerk or magistrate would have the capacity to do so. The blunt fact is that in 99 per cent. of the cases it is completely ignored.
I want to reinforce the argument which has been put forward that at least some consideration should be given in the case of small payments. The position of a deserted wife is harsh enough already. It usually means that the husband who is at fault does not have a very


large earning capacity—or at least what he discloses is not large—and the payments that she receives are small enough without this harsh burden. It would show some sign of humanity if in these cases, which together make up a great social problem, affecting tens of

thousands of women, a little compassion were shown, rather than this very cold, illogical logic.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 176, Noes 250.

Division No. 133.]
AYES
[6.35 p.m.


Abse, Leo
Holman, Percy
Plummer, Sir Leslie


Ainsley, William
Houghton, Douglas
Price, J. T. (Westhoughton)


Allaun, Frank (Salford, E.)
Hoy, James H.
Probert, Arthur


Bacon, Miss Alice
Hughes, Cledwyn (Anglesey)
Pursey, Cmdr. Harry


Bellenger, Rt. Hon. F. J.
Hughes, Emrys (S. Ayrshire)
Randall, Harry


Benson, Sir George
Hughes, Hector (Aberdeen, N.)
Rankin, John


Blackburn, F.
Hunter, A. E.
Reid, William


Boardman, H.
Hynd, H. (Accrington)
Reynolds, G. W.


Bowden, Herbert W. (Leics, S.W.)
Hynd, John (Attercliffe)
Ross, William


Bowles, Frank
Irvine, A. J. (Edge Hill)
Royle, Charles (Salford, West)


Boyden, James
Irving, Sydney (Dartford)
Shinwell, Rt. Hon. E.


Brockway, A. Fenner
Jay, Rt. Hon. Douglas
Short, Edward


Brown, Rt. Hon. George (Belper)
Johnston, Douglas (Paisley)
Silverman, Sydney (Nelson)


Brown, Thomas (Ince)
Jones, Dan (Burnley)
Skeffington, Arthur


Butler, Herbert (Hackney, C.)
Jones, Elwyn (West Ham, S.)
Slater, Mrs. Harriet (Stoke, N.)


Butler, Mrs. Joyce (Wood Green)
Jones, Jack (Rotherham)
Slater, Joseph (Sedgefield)


Castle, Mrs. Barbara
Jones, J. Idwal (Wrexham)
Small, William


Chapman, Donald
Jones, T. W. (Merioneth)
Smith, Ellis (Stoke, S.)


Chetwynd, George
Kelley, Richard
Snow, Julian


Cliffe, Michael
Kenyon, Clifford
Sorensen, R. W.


Corbet, Mrs. Freda
Key, Rr. Hon. C. W.
Soskice, Rt. Hon. Sir Frank


Craddock, George (Bradford, S.)
King, Dr. Horace
spriggs, Leslie


Cronin, John
Lawson, George
Steele, Thomas


Crosland, Anthony
Lee, Frederick (Newton)
Stewart, Michael (Fulham)


Crossman, R. H. S.
Lever, L. M. (Ardwick)
Stones, William


Cullen, Mrs. Alice
Lipton, Marcus
Stross, Dr. Barnett (Stoke-on-Trent, C.)


Davies, G. Elfed (Rhondda, E.)
Logan, David
Summerskill, Dr. Rt. Hon, Edith


Davies, Harold (Leek)
Mabon, Dr. J. Dickson
Swingler, Stephen


Davies, Ifor (Gower)
McCann, John
Sylvester, George


Davies, S. O. (Merthyr)
McInnes, J.
Symonds. J. B.


Deer, George
McKay, John (Wallsend)
Taylor, Bernard (Mansfield)


Dempsey, James
Mackie, John
Taylor, John (West Lothian)


Diamond, John
Mahon, Simon
Thomas, Iorwerth (Rhondda, W.)


Dodds, Norman
Mallalieu, E. L. (Brigg)
Thompson, Dr. Alan (Dunfermline)


Driberg, Tom
Mallalieu. J.P. W. (Huddersfield. B.)
Thomson, G. M. (Dundee, E.)


Dugdale, Rt. Hon. John
Manuel, A. C.
Thornton, Ernest


Ede, Rt. Hon. Chuter
Mapp, Charles
Timmons, John


Edelman, Maurice
Mason, Roy
Tomney, Frank


Edwards, Rt. Hon. Ness (Caerphilly)
Mayhew, Christopher
Ungoed-Thomas, Sir Lynn


Edwards, Robert (Bilston)
Mellish, R. J.
Wainwright, Edwin


Edwards, Walter (Stepney)
Mendelson, J. J.
Warbey, william


Evans, Albert
Millan, Bruce
Watkins, Tudor


Fitch, Alan
Mitchison, G. R.
Wells, Percy (Faversham)


Foot, Dingle
Monslow, Walter
Wells, William (Walsall, N.)


Forman, J. C.
Moody, A. S.
Wheeldon, W. E.


Fraser, Thomas (Hamilton)
Mort, D. L.
Whitlock, William


Gaitskell, Rt. Hon. Hugh
Moyle, Arthur
Willey, Frederick


Galpern, Sir Myer
Mulley, Frederick
Williams, D. J. (Neath)


Ginsburg, David
Neal, Harold
Williams, W. R. (Openshaw)


Gordon Walker, Rt. Hon. P. C.
Oliver, G. H.
Willis, E. G. (Edinburgh, E.)


Gourlay, Harry
Oram, A. E.
Wilson, Rt. Hon. Harold (Huyton)


Grey, Charles
Owen, Will
Winterbottom, R. E.


Gunter, Ray
Padley, W. E.
Woof Robert


Hall, Rt. Hon. Glenvil (Colne Valley)
Pannell, Charles (Leeds, W.)
Wyatt, Woodrow


Hamilton, William (West Fife)
Parker, John (Dagenham)
Yates, Victor (Ladywood)


Hayman, F. H.
Paton, John
Zilliacus, K.


Healey, Denis
Pavitt, Laurence



Herbison, Miss Margaret
Pearson, Arthur (Pontypridd)
TELLERS FOR THE AYES:


Hill, J. (Midlothian)
Peart, Frederick
Dr. Broughton and Mr. Redhead.


Hilton, A. V.
Pentland, Norman





NOES


Allason, James
Barter, John
Bidgood, John C.


Amory, Rt. Hn. D. Heathcoat (Tiv'tn)
Batsford, Brian
Biggs-Davison, John


Arbuthnot, John
Baxter, Sir Beverley (Southgate)
Bingham, R. M.


Ashton, Sir Hubert
Beamish, Col. Tufton
Birch, Rt. Hon. Nigel


Atkins, Humphrey
Bennett, F. M. (Torquay)
Bishop, F. P.


Balniel, Lord
Bennett, Dr. Reginald (Gos &amp; Fhm)
Bossom, Clive


Barber, Anthony
Berkeley, Humphry
Bourne-Arton, A.


Barlew, Sir John
Bevins, Rt. Hon. Reginald (Toxteth)
Box, Donald




Boyle, Sir Edward
Hirst, Geoffrey
Pannell, Norman (Kirkdale)


Brewis, John
Hobson, John
Partridge, E.


Bromley-Davenport, Lt.-Col. W. H.
Hocking, Philip N.
Pearson, Frank (Clitheroe)


Brooke, Rt. Hon. Henry
Holland, Philip
Peel, John


Brooman-white, R.
Holt, Arthur
Percival, Ian


Browne, Percy (Torrington)
Hopkins, Alan
Pickthorn, Sir Kenneth


Bullard, Denys
Hornby, R. P.
Pike, Miss Mervyn


Burden, F. A.
Hornsby-Smith, Rt. Hon. Patricia
Pitman, I. J.


Butcher, Sir Herbert
Howard, John (Southampton, Test)
Pitt, Miss Edith


Campbell, Sir David (Belfast, S.)
Hughes Hallett, Vice-Admiral John
Powell, J. Enoch


Campbell, Gordon (Moray &amp; Nairn)
Hughes-Young, Michael
Price, David (Eastleigh)


Carr, Compton (Barons Court)
Hulbert, Sir Norman
Prior, J. M. L.


Cary, Sir Robert
Hitchison, Michael Clark
Prior-Palmer, Brig. Sir Otho


Channon, H. P. G.
Iremonger, T. L.
Proudfoot, Wilfred


Chataway, Christopher
Irvine, Bryant Godman (Rye)
Ramsden, James


Cole, Norman
Jackson, John
Redmayne, Rt. Hon. Martin


Collard, Richard
James, David
Rees, Hugh


Cooper-Key, Sir Neill
Jenkins, Robert (Dulwich)
Rees-Davies, W. R.


Cordeaux, Lt.-Col. J. K.
Johnson, Dr. Donald (Carlisle)
Renton, David


Cordie, John
Johnson, Eric (Blackley)
Ridley, Hon. Nicholas


Corfield, F. V.
Johnson Smith, Geoffrey
Ridsdale, Julian


Costain, A. P.
Jones, Rt. Hn. Aubrey (Hall Green)
Rippon, Geoffrey


Courtney, Cdr, Anthony
Joseph, Sir Keith
Roberts, Sir Peter (Heeley)


Craddock, Sir Beresford (Spelthorne)
Kerans, Cdr. J. S.
Robinson, Sir Roland (Blackpool, S.)


Critchley, Julian
Kerby, Capt. Henry
Robson Brown, Sir William


Crosthwaite-Eyre, Col. O. E.
Kerr, Sir Hamilton
Ropner, Col. Sir Leonard


Cunningham, Knox
Kimball, Marcus
Sandys, Rt. Hon. Duncan


Curran, Charles
Kirk, Peter
Scott-Hopkins, James


Currie, G. B. H.
Kitson, Timothy
Sharples, Richard


Dalkeith, Earl of
Lancaster, Col. C. G.
Shaw, M.


Dance, James
Leather, E. H. C.
Shepherd, William


d'Avigdor-Goldsmid, Sir Henry
Leavey, J. A.
Simon, Sir Jocelyn


de Ferranti, Basil
Legge-Bourke, Sir Harry
Skeet, T. H. H.


Donaldson, Cmdr. C. E. M.
Lewis, Kenneth (Rutland)
Smith, Dudley(Br'ntf'rd &amp; Chiswick)


Drayson, G. B.
Lilley, F. J. P.
Smithers, Peter


Duncan, Sir James
Lindsay, Martin
Spearman, Sir Alexander


Eden, John
Linstead, Sir Hugh
Stevens, Geoffrey


Elliott, R. W.
Litchfield, Capt. John
Stodart, J. A.


Emery, Peter
Longbottom, Charles
Storey, Sir Samuel


Emmet, Hon. Mrs. Evelyn
Loveys, Walter H.
Studholme, Sir Henry


Farey-Jones, F. W.
Low, Rt. Hon. Sir Toby
Summers, Sir Spencer (Aylesbury)


Farr, John
Lucas-Tooth, Sir Hugh
Talbot, John E.


Fell, Anthony
MacArthur, Ian
Tapsell, Peter


Finlay, Graeme
McLaren, Martin
Taylor, Sir Charles (Eastbourne)


Fraser, Nigel
McLaughlin, Mrs. Patricia
Taylor, W. J. (Bradford, N.)


Fletcher-Cooke, Charles
Maclay, Rt. Hon. John
Teeling, William


Fraser, Ian (Plymouth, Sutton)
Macleod, Rt. Hn. Iain (Enfield, W.)
Temple, John M.


Freeth, Denzil
Macleod, John (Ross &amp; Cromarty)
Thomas, Leslie (Canterbury)


Gammans, Lady
McMaster, Stanley R.
Thomas, Peter (Conway)


Gardner, Edward
Macmillan, Maurice (Halifax)
Thompson, Kenneth (Walton)


George, J. C. (Pollok)
Macpherson, Niall (Dumfries)
Thornton-Kemeley, Sir Colin


Gibson-Watt, David
Maddan, Martin
Tiley, Arthur (Bradford, W.)


Glover, Sir Douglas
Maltland, Cdr. Sir John
Turner, Colin


Glyn, Dr. Alan (Clapham)
Manningham-Buller, Rt. Hn. Sir R.
Turton, Rt. Hon. R. H.


Glyn, Sir Richard (Dorset, N.)
Markham, Major Sir Frank
van Straubenzee, W. R.


Godber, J. B.
Marshall, Douglas
Vaughan-Morgan, Sir John


Goodhart, Philip
Marten, Neil
Vickers, Miss Joan


Goodhew, Victor
Mathew, Robert (Honiton)
Wade, Donald


Gower, Raymond
Matthews, Gordon (Meriden)
Wakefield, Edward (Derbyshire, W.)


Grant, Rt. Hon. William (Woodside)
Maudling, Rt. Hon. Reginald
Wakefield, Sir Wavell (St. M'lebone)


Green, Alan
Mawby, Ray
Wall, Patrick


Grimond, J.
Mills, Stratton
Watkinson, Rt. Hon. Harold


Grimston, sir Robert
Montgomery, Fergus
Watts, James


Hall, John (Wycombe)
Morgan, William
Wells, John (Maidstone)


Hamilton, Michael (Wellingborough)
Mott-Radclyffe, Sir Charles
Williams, Dudley (Exeter)


Harris, Reader (Heston)
Nabarro, Gerald
Williams, Paul (Sunderland, S.)


Harrison, Brian (Maldon)
Neave, Airey
Wills, Sir Gerald (Bridgwater)


Harrison, Col. J. H. (Eye)
Nicholls, Harmar
Wise, A. R.


Harvie Anderson, Miss
Noble, Michael
Wolrige-Gordon, Patrick


Heald, Rt. Hon. Sir Lionel
Nugent, Sir Richard
Wood, Rt. Hon. Richard


Henderson, John (Cathcart)
Oakshott, Sir Hendrie
Woodhouse, C. M.


Hendry, Forbes
Ormsby Gore, Rt. Hon. D.
Woodnutt, Mark


Hicks Beach, Maj. W.
Orr-Ewing, C. Ian
Worsley, Marcus


Hiley, Joseph
Osborn, John (Hallam)
Yates, William (The Wrekin)


Hill, Dr. Rt. Hon. Charles (Luton)
Osborne, Cyril (Louth)
TELLERS FOR THE NOES:


Hill, J. E. B. (S. Norfolk)
Page, Graham
Mr. Bryan and Mr. Whitelaw.

Clause 6.—(TOBACCO DEALERS' LICENCES.)

6.45 p.m.

Mr. Redhead: I beg to move, in page 3, line 38, at the end to insert:
(2) Any such licence as is mentioned in the last foregoing subsection may be granted in Great Britain for the sale of tobacco by retail from a registered goods vehicle the property of and plying from the premises of the person authorised to sell tobacco at those premises and accordingly the said section one hundred and eighty-seven shall have effect from the end of September, nineteen hundred and sixty, with the addition immediately after subsection (3) of the said section of the following subsection:—
(3A) Notwithstanding anything in the said subsection (2), a licence under this section may be granted in Great Britain, subject to such conditions as the Commissioners think fit to impose, so as to authorise the sale of tobacco by retail from a registered goods vehicle specified in the licence and being the property of and plying from the premises of the person authorised to sell tobacco at those premises; and this Act shall have effect accordingly as if the vehicle specified in a licence so granted were premises of the person authorised to sell tobacco there".
The purpose of this Amendment is to give effect to a suggestion made during the Committee stage when we had under consideration the modest reform of the tobacco dealers' licences proposed by the Chancellor, a suggestion which the Economic Secretary promised to consider again having already had it under consideration in connection, I believe, with an informal approach to the Treasury.
The intention of the Amendment is to make it possible for a tobacco dealers' licence to be issued in respect of mobile shops and vehicles. As was explained in Committee, the tobacco dealers' licence duty was not orginally devised for revenue purposes as such but solely as a means of control to safeguard for the revenue the amount due on tobacco. It is and always has been a form of registration of legitimate traders in tobacco in order that Customs and Excise officials may be able to identify the legitimate outlets of tobacco and thus check on any illicit sales of uncustomed or stolen tobacco, and, in effect, to have some measure of control over the possibility of adulteration of tobacco which is itself an offence.
The original provision of the law in this regard—I believe it goes back for more than 100 years—stipulated that such licence should be issued only in respect of fixed premises. There was, I think,

legitimate cause in those days for relating such licences to fixed premises when otherwise there was a considerable risk of the hawking of tobacco which, if the licence was not restricted to such premises, might well have gone undetected in the evasion of the main duty. With minor exceptions that restriction has been applied rigidly ever since and, indeed, interpreted by the Customs and Excise Department in a very rigid fashion. It is the submission of my hon. Friends and myself that that rigidity is no longer necessary, no longer called for, from any reasonable consideration of safeguarding the revenue.
Today in many parts of the country there exist mobile shops, a feature which was quite unknown when this law was first promulgated. The shops are operated from vehicles and vans over a wide area, even in urban areas, and fulfil a public need by carrying a considerable variety of goods. But as the law now stands they are not permitted to deal in tobacco and cigarettes because, as mobile vehicles, they cannot be licensed for this purpose.
The present position is clearly absurd. For example, it is perfectly permissible for me to place an order at the premises or the shop of a tobacco dealer duly and properly licensed, and for the tobacco and cigarettes which I have ordered to be delivered by van to my house. No offence is committed. But for the van man to make a casual sale in the course of selling other goods at my house would be to commit an offence because the transaction, technically, did not take place at the licensed premises. The van man would commit the heinous offence of what is known as tobacco hawking by engaging in any such practice. I suggest that there is already a considerable degree of evasion of this provision, and the absence of an ability to gain a licence because of the restrictions of the law only encourages a degree of connivance on the part of both the trader and the public.
It is perfectly possible to obtain tobacco, and cigarettes on a train, but it is quite illegal to obtain them by way of a mobile vehicle plying on the highway and calling at households. In order to preserve at least an adherence to the law and yet to make some degree of concession to common sense in this


matter, the Customs and Excise Department has been compelled from time to time to connive at various queer devices to make it possible to issue a licence in respect of some traders who wish to deal perfectly legitimately in tobacco and cigarettes, devices which, frankly, make the average person look upon the present provisions as an extraordinary degree of fussy red tape.
I can give an example of a coffee stall which, because it was on wheels, was not permitted to have a tobacco dealer's licence. The Customs and Excise Department said to the owner, "You can put yourself right if you arrange for the wheels to be sunk in the earth, or remove the wheels, or lash the vehicle firmly to stakes driven into the ground. Then we shall be prepared to regard the coffee stall, although theoretically mobile, as constituting fixed premises for which a licence may be issued." Devices of that kind are really absurd. They ought not to be resorted to in order to remove what clearly are silly restrictions in these days.
During the course of our discussion of Clause 6 in Committee, the Economic Secretary made a point of the fact that there still exists today a degree of trafficking in uncustomed and stolen tobacco. I do not know to what extent that still obtains. He gave that reason, quite understandably, as one why we must still maintain the system of tobacco dealers' licences. I suggest that the risks in this particular respect would be in no wise rendered greater by allowing licences to be issued in respect of registered vehicles as proposed in this Amendment, particularly as under the Amendment this would be limited to registered goods vehicles plying from premises which are themselves duly licensed for tobacco retailing.
The Amendment contemplates that in order to ensure any further requisite safeguards, the Commissioners might lay down such conditions in attachment to such licences as they may feel necessary. That, I suggest, would ensure that it would he perfectly possible to have a cross-check and cross-reference of the stock carried by any licensed shop or mobile vehicle in relation to the records of the tobacco dealer's fixed premises. Therefore, any risks in this regard would

be of the most minimal character. I submit that all the essentials of adequate control in this connection would be well maintained within the provisions contained in the Amendment.
In Clause 6 originally, the Chancellor introduced a very modest but very sensible administrative reform in regard to this ancient licence duty. I hope that he may be persuaded not to limit his reforming zeal to that but to be prepared to accept the Amendment, which I am certain would remove a very irksome restriction on legitimate and reputable traders. It would remove something which in the minds of the public is an impediment to good service to them and regarded as a piece of fussy and unnecessary red tape.

Mr. Barber: The hon. Member for Walthamstow, West (Mr. Redhead) has, as usual, put his case in support of the Amendment with complete fairness. I can add that it also has the attraction that this proposed Amendment would involve a modest increase in revenue, which I have not the slightest doubt would be very valuable this year.
As the hon. Member said, the effect of the Amendment would be to authorise the issue of licences for the sale of tobacco by retail from registered goods vehicles specified in the licence and the property of and plying from the premises of the person authorised to sell tobacco on his premises.
Last year, the Co-operative Union Ltd. approached my right hon. Friend the then Economic Secretary with a request that the law should be amended to allow tobacco and cigarettes to be sold from its mobile shops. The outcome was that my right hon. Friend asked the Commissioners of Customs and Excise to inquire into the proposal and report back to him. The Commissioners saw representatives of the Co-operative Union and the National Union of Retail Tobacconists and, in due course, they reported. I saw that report in, I think, April of this year. I considered as carefully as I could the whole question. I came to the conclusion that a case had not been made for the extension which they had requested.

Mrs. Harriet Slater: Why?

Mr. Barber: May I be allowed to proceed with my speech? I did not interrupt the hon. Member who moved the Amendment.
The next thing which occurred was that, when we were discussing Clause 6 of the Bill in Committee, this matter was raised again. I promised to look into it, but explained to the Committee that, in view of the very recent examination, I could not hold out any great hope of the possibility of anything being done in this year's Finance Bill.
I have genuinely given this matter further consideration since that time. I have to tell the House that it involves very difficult considerations. It is not an easy matter to determine whether or not it would be right and proper, and safe, to allow the sale from goods vehicles in the manner provided for by this Amendment.
Those hon. Members who were here at the time will remember that, in 1951, the Labour Government introduced a modest extension of the law, which was debated at some length, to allow licences for mobile vehicles to meet an exceptional and temporary need. I have not the slightest doubt that at the time when this matter was being considered by that Government they naturally took into account the various considerations which were relevant in connection with a further extension of the kind which has now being suggested by the hon. Member.
From the point of view of the consumer, the first thing to bear in mind is that there are at present ample outlets for the sale of tobacco. It is true that in certain places they are limited in number and there is difficulty, but there are 420,000 tobacconists with shops, that is to say, there is about one licence for every 40 smokers. From the revenue point of view, to which the hon. Member referred—

Mrs. Slater: May I ask whether due consideration has been given to the consumer? These mobile shops operate mostly on large new housing estates, where the provision of ordinary shops is very inadequate. This means that the consumer on such a housing estate may get his groceries delivered to his door, but cannot get tobacco or cigarettes delivered. This seems to be an exceptional case in which the consumer has the right to be considered.

Mr. Barber: I entirely agree with the hon. Lady that the point of view of the consumer is of great importance in this context, but I would remind her again that the Labour Government, in 1951, took specific steps to try, so far as they thought reasonable and proper, to help in those circumstances by allowing licences to be issued to mobile shops to meet an exceptional and temporary need.
I realise that—not through any tough interpreation of the law by the Customs and Excise, but by a proper interpretation—because of the wording, the provision "exceptional and temporary need" does not help in every case. At any rate, it was thought in those days that this was as far as it was reasonable to go. There was a long debate, and the proposal was opposed by many of my hon. Friends who were then on the other side of the House, but in the end the House decided that this was right.
7.0 p.m.
I was dealing with the point raised by the hon. Member for Walthamstow, West about the control of points of sale of tobacco. There is the definite interest from the point of view of Customs and Excise of knowing and controlling the points of sale of tobacco which, otherwise, could conceal dealing in uncustomed tobacco. If it were not so, then prior to this Finance Bill when we were reviewing the question of tobacco licences, dealt with in Clause 6, we should have reached the conclusion that licences were unnecessary; but we still believe them to be very necessary.
I realise that the present Amendment attempts to meet this point by restricting sales to registered goods vehicles operated by persons who are licensed to sell tobacco at their premises. But this would establish only the base from which the vehicle operated and would not impose any limitation on the vehicle operator's freedom to sell tobacco away from that base. In particular, it would not limit sales to particular points or particular routes. There could be, I should have thought, no satisfactory Revenue control over a vehicle which, like that of an itinerant ice cream vendor, was free to travel wherever the driver thought business was to be found.

Mr. G. R. Mitchison: Is there not a reference—I had something


to do with the preparation of the Amendment—to:
… such conditions as the Commissioners think fit to impose …
which would enable them to deal with that?

Mr. Barber: I was just coming to that point. I have also considered that aspect, but I think that as soon as one attempted to introduce some limit—which could be done by the Clause, I agree—prescribing routes or points of sale, for example, it would put the Customs and Excise in a very difficult position. In the first place, it would certainly be drawn into a conflict between trade interests, and I am sure—I feel that the House will agree with me on this whatever hon. Members may think of the merits of the proposal—that that is not the sort of task which it would be right to impose upon the Customs and Excise.
We have, as I have said, considered this again, and we have reached the conclusion that, although in particular cases it would be a limited advantage to a number of consumers, the need for a general extension in present circumstances is not made out. However, I must tell the House that, in my view, this is not a conclusion which must stand for all time. We made a thorough investigation as a result of the approach made to my predecessor as Economic Secretary not long ago, and we have considered the matter again. As I say, this is not a conclusion which must stand for all time. Circumstances may change and we will certainly keep the matter under review. However, I could not at this time advise the House to accept the Amendment.

Mr. Percy Holman: How does the hon. Gentleman's argument about Customs and Excise control operate in respect of the thousands of automatic cigarette machines which are now to be found all over the country?

Mr. Barber: Sale from automatic machines takes place from a fixed point. It is in that respect that the difficulty arises with mobile shops.

Mr. Holman: But the automatic machines are outside the shops.

Mr. A. E. Oram: Having listened to the Economic Secretary's reply, I am still completely at a

loss to know what is the Treasury's case against the very modest, sensible and commonsense proposal by my hon. Friend the Member for Walthamstow, West (Mr. Redhead).
Several references have been made to the debate during the Committee stage. I recall that the Economic Secretary then said that he thought that the arguments against the proposal were by no means overwhelming. I suggest that his speech today has borne out that the arguments are by no means overwhelming. I welcome what he has said about the case still being open and the possibility of its being reconsidered in the future, but in the absence of some adequate argument about present circumstances I cannot understand why the Government are taking this particularly unhelpful attitude.
My hon. Friend the Member for Stoke-on-Trent, North (Mrs. Slater) referred to the fact that mobile shops are necessary in country districts and large housing estates where, perhaps, fixed shops cannot provide an adequate service. It is particularly in those cases that we feel that tobacco licences should be granted for mobile shops. The present situation is, as has been explained, that mobile shops can be licensed if there is a special local need; but in such cases the licence is only temporary.
Let us take the case of a trader who, because he has not been able to obtain a fixed shop in the area which he wishes to serve, operates a mobile vehicle to meet the needs of his customers, being granted a temporary licence because it is recognised that there is a special local need. Along may come a competitor who secures a fixed shop and a licence. The operator of the mobile shop then loses his temporary licence. I suggest that that is an anomalous and unfair situation.
I said during the Committee stage debate that I suspected that the Government were misusing their powers in respect of the granting of tobacco licences to restrict competition. Some of the remarks of the Economic Secretary towards the end of his speech seemed rather to confirm that. I suggest that the tobacco licence was never intended, and ought not to be intended, as a means of restricting competition. It is not comparable with a liquor licence. It is merely


—I think that the Economic Secretary will admit this—a means of identifying the trader who is to sell tobacco and cigarettes so that suitable control can be exercised over his trade.
The licence should be readily available to all who wish to sell tobacco. Under the Amendment a mobile shop would be very easily identifiable. These mobile shops are not just travelling vans. They are properly equipped mobile shops. There is a definition for Purchase Tax purposes of a mobile shop, and the provisions in the Amendment suggest that the mobile shops operate from a fixed shop which is itself licensed. Thus the possibility of identifying a mobile unit is perfectly clear.
I believe that there is something more behind this than the Economic Secretary was prepared to reveal. He referred to the fact that he had had representations from the National Union of Retail Tobacconists. I am wondering—I hope that he will be a little more forth-coming—

Mr. Barber: Perhaps I may correct the hon. Gentleman. What I said was that as a result of the approach by the Co-operative Union Ltd. the Customs and Excise discussed the matter with the Co-operative Union and also with the National Association of Retail Tobacconists. I certainly have had no representations from the Association at all.

Mr. Oram: I accept that, of course, but the Treasury obviously has the views of the National Union of Retail Tobacconists in mind in reaching this conclusion.
I believe—I should welcome a denial of this if it is untrue—that pressure has been brought to bear upon the Government to misuse the machinery of tobacco licensing to give a monopoly value or a quasi-monopoly value to certain existing traders with tobacco licences. If that is so, this is a complete misuse of tobacco licensing. It was never intended that tobacco licences should be used in this way. The Government should have further thoughts about their attitude to this Amendment.

Mr. Glenvil Hall: I understood the Economic Secretary to say that he would like to do this, that there is a good deal in the proposition, that it is already done in part on a temporary basis, but the

reason why the Government cannot accede to the request is that it would or might lead to fraud. The Government believe that people would sell tobacco and cigarettes from mobile vans not having been licensed to do so.
Vans of that type can be easily traced. The Customs and Excise authorities have their own inspectors and ways and means of finding whether people selling cigarettes and tobacco are properly licensed according to law. All that my hon. Friend the Member for Walthamstow, West (Mr. Redhead) is asking in the Amendment is that those who already have licences and are operating from a definite shop or shops, whose vans are properly marked with their names, should be allowed when they are visiting housing estates and other outlying districts to sell articles which they can sell in their shops in the town, namely, tobacco and cigarettes.
Perhaps there is a loophole here? I should like to know if there is. How could there possibly be any fraud when the regulations will be as tight as that? I am not a Co-operative Member, but I cannot but agree with my hon. Friend the Member for East Ham, South (Mr. Oram). If co-operative societies were allowed to sell from their vans in this way, other traders would have the same facilities. Why not? If those who have shops have protested—I can understand their protests—I do not think that that is a sufficient reason for refusing to accept the Amendment, which strikes me as being eminently reasonable.

Mr. Laurence Pavitt: I want to intervene very briefly to reinforce the arguments which have been advanced by my hon. Friends. The Economic Secretary's case for refusing this very limited proposal does not carry a great deal of weight. The main burden of his contention seemed to be the difficulty of maintaining a satisfactory check. The Amendment is worded in such a way as to provide adequate safeguards to deal with any difficulties which might arise.
I ask the House to get away from the London mind on this matter. We always seem to approach these subjects as though there is a tobacconist's shop at every corner and a kiosk at every railway station. We should try to approach this subject from the consumer's point of view. There are still many areas in


this country in which selling points are long distances apart. Some of my hon. Friends representing Scottish constituencies could make a strong plea on this question of mere geographical situation.
By stating an average the Economic Secretary gave no answer, because, as everyone knows, an average means nothing. It may be true that the average is one selling point for every 40 smokers, but we must remember that densities vary. Before I entered the House I spent some little time trying to find what the average doctor received as average pay. After three years I found that there was no such animal as the average doctor. I suspect that there is no real way to define the average number of selling points if the question is looked at from the point of view of the consumer.
7.15 p.m.
Like my hon. Friend the Member for East Ham, South (Mr. Oram), with due respect to the Co-operative Union, I feel that the approach has been rather from the point of view of retailers and not sufficiently from the point of view of the consumers. The Amendment states quite clearly that a licence would be
subject to such conditions as the Commissioners think fit to impose …".
It would be quite easy to devise a way in which the ordinary vehicle which the Economic Secretary is scared of—a van or cart being driven round an area for the purpose of hawking—could be clearly distinguished from a mobile shop. A mobile shop has a proper entrance, internal lighting, display and a cash register. It is actually a shop on wheels. It would not be beyond the wit of man to draw up a short summary of the conditions which a mobile shop should fulfil. It would certainly be just as easy to do that as to direct that a coffee stall should have stakes in the ground or employ some other method by which it is no longer a coffee stall but is a fixed place.
I hope that the Economic Secretary will consider the economic straits of the country. He said that one great asset in the Amendment was that it would bring in more revenue. In spite of the 6 per cent. Bank Rate, the economic stringency and everything else perpetrated by this Government, perhaps on this occasion we on this side can give him a little help. If the country's economic situation is so straitened, let

the hon. Gentleman accept the Amendment and have a little more in the till from tobacco licences for mobile shops.

Mr. Jack Jones: I had not the slightest intention of intervening in the debate. It is not usual for me to talk about finance and budgetary matters, but when I heard the feeble defence put forward by the Economic Secretary it prompted me to tell him a few home-truths.
I am a non-smoker. I have never touched a cigarette in my life, nor do I intend to do so as long as I live. As I do not smoke, I do not have a vested interest in this matter, but my wife likes a cigarette. I live in a part of the country which is developing. Why should not the newsagent with a licence who lives two miles away from where I live be able to bring a packet of "fags" along with the morning paper? The Government will not allow him to. It gives me a curious feeling. The notion of Tory freedom is an anachronism. Our grocer delivers groceries to our door, thereby helping my wife, because she does not have to spend money on petrol and waste her time by going to collect them. Why cannot my grocer deliver a packet of cigarettes?
The Economic Secretary said that it would have an effect upon retailers. Retailers sell an enormous amount of cigarettes. Why should not a retailer be able to deliver them to consumers' doors, thereby keeping queues away from his shop when he is busy? If he were allowed to do so he would prevent chaos inside his shop on a Saturday morning. In other words, if a retailer can get rid of his stock without crowding his shop on a Saturday, so much the better for him and for the consumer.
It is ridiculous to say that there will be jiggery-pokery and non-payment of revenue. If a licence to sell cigarettes and tobacco is granted to a local newsagent or grocer, who already delivers newspapers or groceries, he should be entitled to sell them and deliver them if he feels inclined to or if his customers request him to do so. It is fantastic that the Government should refuse this freedom to our people, who want to be given the opportunity to purchase what they wish, as they wish, where they wish, at any point they wish. It is wrong that they should be denied this opportunity


simply because the Government have decided that, because they are refusing other things, they cannot accept this Amendment.
I am speaking as an ex-junior Minister. The Economic Secretary has been told by somebody else, "Do not bother. It does not matter. Take no notice. They cannot have it". That is not the way for the Government to conduct the country's affairs.

Mr. Dempsey: I ask the Economic Secretary to consider this problem from the national viewpoint rather than from a City complex. To say that there is one tobacco licence to every forty smokers is a most misleading application of the law of averages. After all, some parts of the country are very sparsely populated. I assure the hon. Gentleman that I could take him to areas which have several square miles of land and buildings, but there is not a single tobacco licence available in such a huge area with a fairly large rural community.
I hope that the Economic Secretary realises that he is doing the general public a disservice by not allowing an extension of tobacco licences in respect of mobile trading vans. These vans are most up-to-date shopping centres. Some of them are obviously among the finest in Europe. Indeed, I can say, speaking from my own experience, that many of them are far more hygienic places from which to sell goods than are some of the existing obsolete shops. I cannot understand the argument of the Minister. Has he forgotten that there is such an important right in this country as freedom of consumer choice?
Does the Economic Secretary not realise that consumers in many parts of the country have shopping facilities only once a week and that if they cannot purchase tobacco and cigarettes from mobile vans they are restricted to using the shops in perhaps some remote area, where they experience difficulty in obtaining their choice of brands. Surely if vans can go to little crofts and farms and small hamlets to supply goods and hardware, which, incidentally, is a costly service, there is no legitimate reason for denying traders the right also to sell tobacco and cigarettes.
I am very interested in the Economic Secretary's remarks. He as offered only one argument why this provision should not be extended to mobile vans. His argument is that it is very difficult to locate and supervise unfixed selling points. If a tobacco licence is in respect of fixed promises then, obviously, it is easier to supervise. I should like to draw his attention to the fact that some of us have been members of local authority licensing committees for many years and that they have to send out inspectors and supervisors to see that the laws of this country are enforced on mobile trading premises. Has he forgotten that often coal is not sold from fixed premises? It is sold from mobile vans. Inspectors or weights and measures officers have to locate those mobile premises at various selling points throughout large counties in order to enforce the law, and they do it very efficiently indeed.
Does the Economic Secretary realise that a recent Act of Parliament was passed whereby mobile trading vans are controlled from a health and hygienic point of view. Here again, health officers have no difficulty in enforcing the law on these mobile trading vans. Why, then, is there a difficulty in ensuring that the Customs and Excise laws are enforced in respect of the sale of tobacco and cigarettes from unfixed premises? There is obviously no difficulty. Where there is a will there is a way, but I believe that the Minister has not the will to extend this concession.
I beg the Economic Secretary to realise that we are dealing with this problem in 1960 and not during the period of the Labour Government from 1945 to 1951. We are dealing with a new problem in a period when neighbourhood units have been added to existing townships and when private enterprise has refused to provide shopping centres for many parts of those areas and failed, therefore, to meet consumer demand. I could take the Minister to my own county and show him several derelict shopping sites where we cannot induce private enterprise to build. If other traders are willing to serve an area and to provide customers with an efficient service of goods and commodities, the House of Commons should be the very last institution to stand in the way of the provision of such a full and


efficient service, yet the Government are doing so by restricting the sale of tobacco and cigarettes from mobile vans.
Does not the Economic Secretary agree that the present tendency is to develop a distributive service on the basis of mobility? All sorts of services for the supply of all sorts of goods and perishable commodities are being provided by mobile trading vans, and if the various enactments to which I have referred can be enforced, there should be no difficulty in introducing a provision by which we could extend the tobacco licence from fixed to unfixed premises—as these mobile trading vans are described.
I agree with the hon. Gentleman that by increasing sales one increases the Revenue, but he will realise that one also increases the tax yield. Therefore, if we are to continue our efforts to provide efficient services of this kind for the community, we are entitled to eliminate as many restictions as possible, and this is one restriction that the distributive trade could very well do without.
It must be remembered that these vans operate not only from premises that are already licensed but from premises that are already rated. In addition to that, they pay a fair share of motor taxation consequential on the service operated. There is no valid reason, therefore, for restricting their use for the sale of tobacco, etc. The existing law is unquestionably archaic and should be repealed at once. I ask the Economic Secretary to consider this matter and to realise that thousands of our fellow citizens depend on these door-to-door services and ought to be able to purchase their tobacco and cigarettes by this means if they so wish.

7.30 p.m.

Mr. Snow: I wonder whether the Economic Secretary has considered the distributive problems that have arisen in the Midlands as a result of the enormous transfer of population in connection with

the overspill scheme, where population is going out to the Staffordshire areas from Birmingham. I doubt very much whether the Commissioners have analysed the ratio of distributive points, not only as to the number of residences, but to the geographical location and density of those residences.

While I do not at this point speak for the co-operative societies, the impression I get in my part of the world is that those societies have not only taken a good business advantage of the problems of distribution but have, in fact, fulfilled their real function, which is to provide a service for the consumer. Since the Economic Secretary has mentioned the Labour Government's provisions in 1951 to deal with what was then considered a temporary emergency, I would ask him whether the factors that led that Government to introduce those provisions do not still exist because of subsequent transfers of population.

I know that it exists in an extremely urgent form in my part of Staffordshire, and I believe that if the position is examined carefully there will be found to be a perfectly justifiable case for giving what has been called this freedom to be able to purchase conveniently. Many of my constituents, both husband and wife, are at work, because the Midlands is, with great respect to my hon. Friends from Scotland, very hardworking and there is a lot of work there for all, I am glad to say.

The fact is that the shopping facilities are not always convenient. They are particularly inconvenient in these small townships which are absorbing population well beyond their original distributive capacity and which would normally expect to benefit by the sort of mobile distribution that is the subject of the Amendment.

Question put, That those words be there inserted in the Bill: —

The House divided: Ayes 172, Noes 234.

Division No. 134.]
AYES
[7.31 p.m.


Abse, Leo
Bowden, Herbert W. (Leics, S.W.)
Chapman, Donald


Ainsley, William
Bowles, Frank
Chetwynd, George


Allaun, Frank (Salford, E.)
Boyden, James
Corbet, Mrs. Freda


Bacon, Miss Allce
Brockway, A. Fenner
Craddook, George (Bradford, S.)


Baxter, William (Stirlingshire, W.)
Broughton, Dr. A. D. D.
Crosland, Anthony


Bellenger, Rt. Hon. F. J.
Brown, Thomas (Ince)
Cullen, Mrs. Alice


Benson, Sir George
Butler, Herbert (Hackney, C.)
Davies, C. Elfed (Rhondda, E.)


Blackburn, F.
Butler, Mrs. Joyce (Wood Green)
Davies, Harold (Leek)


Boardman, H.
Castle, Mrs. Barbara
Davies, Ifor (Gower)




Davies, S. O. (Merthyr)
Jones, T. W. (Merioneth)
Ross, William


Deer, George
Kelley, Richard
Royle, Charles (Salford, West)


Dempsey, James
Kenyon, Clifford
Short, Edward


Diamond, John
Key, Rt. Hon. C. W.
Silverman, Sydney (Nelson)


Dodds, Norman
King, Dr. Horace
Skeffington, Arthur


Driberg, Tom
Lawson, George
Slater, Mrs. Harriet (Stoke, N.)


Dugdale, Rt. Hon. John
Lee, Frederick (Newton)
Slater, Joseph (Sedgefield)


Ede, Rt. Hon. Chuter
Lever, Harold (Cheetham)
Small, William


Edelman, Maurice
Lever, L. M. (Ardwick)
Smith, Ellis (Stoke, S.)


Edwards, Rt. Hon. Ness (Caerphilly)
Lipton, Marcus
Snow, Julian


Edwards, Robert (Bilston)
Logan, David
Soskice, Rt. Hon. Sir Frank


Edwards, Walter (Stepney)
Mabon, Dr. J. Dickson
Spriggs, Leslie


Evans, Albert
McCann, John
Steele, Thomas


Fitch, Alan
McInnes, James
Stewart, Michael (Fulham)


Fletcher, Eric
McKay, John (Wallsend)
Stones, William


Foot, Dingle
Mahon, Simon
Stress, Dr. Barnett (Stoke-on-T rent, C.)


Forman, J. C.
Mallalieu, E. L. (Brigg)
Summerskill, Dr. Rt. Hon. Edith


Fraser, Thomas (Hamilton)
Mallalieu, J. P. W. (Huddersfield, E.)
Swingler, Stephen


Ginsburg, David
Manuel, A. C.
Sylvester, George


Gourlay, Harry
Mapp, Charles
Symonds, J. B.


Grey, Charles
Mason, Roy
Taylor, Bernard (Mansfield)


Grimond, J.
Mendelson, J. J.
Taylor, John (West Lothian)


Gunter, Ray
Millan, Bruce
Thomas, Iorwerth (Rhondda, W.)


Hall, Rt. Hon. Glenvil (Colne Valley)
Mitchison, G. R.
Thompson, Dr. Alan (Dunfermline)


Hamilton, William (West Fife)
Monslow, Walter
Thomson, G. M. (Dundee, E.)


Hannan, William
Moody, A. S.
Thornton, Ernest


Hayman, F. H.
Mort, D. L.
Timmons, John


Healey, Denis
Moyle, Arthur
Tomney, Frank


Herbison, Miss Margaret
Mulley, Frederick
Ungoed-Thomas, Sir Lynn


Hill, J. (Midothian)
Neal, Harold
Wade, Donald


Hilton A. V.
Oliver, G. H.
Wainwright, Edwin


Holman, Percy
Oram, A. E.
Warbey, William


Holt, Arthur
Owen, Will
Watkins, Tudor


Houghton, Douglas
Padley, W. E.
Weitzman, David


Hoy, James H.
Pannell, Charles (Leeds, W.)
Wells, Percy (Faversham)


Hughes, Cledwyn (Anglesey)
Parker, John (Dagenham)
Wells, William (Walsall, N.)


Hughes, Emrys (S, Ayrshire)
Pavitt, Laurence
Wheeldon, W. E.


Hughes, Hector (Aberdeen, N.)
Pearson, Arthur (Pontypridd)
Whitlook, William


Hunter, A. E-
Peart, Frederick
Willey, Frederick


Hynd, H. (Accrington)
Pentland, Norman
Williams, D. J. (Neath)


Hynd, John (Attercliffe)
Plummer, Sir Leslie
Williams, W. R. (Openshaw)


Irving, Sydney (Dartford)
Price, J. T. (Westhoughton)
Willis, E. G. (Edinburgh, E.)


Janner, Barnett
Pursey, Cmdr. Harry
Wilson, Rt. Hon. Harold (Huyton)


Jay, Rt. Hon. Douglas
Randall, Harry
Winterbottom, R. E.


Johnston, Douglas (Paisley)
Rankin, John
Woof, Robert


Jones, Dan (Burnley)
Redhead, E. C.
Yates, Victor (Ladywood)


Jones, Elwyn (west Ham, S.)
Reid, William
Zilliacus, K.


Jones, Jack (Rotherham)
Reynolds, G. W.



Jones. J. Idwal (Wrexham)
Roberts, Goronwy (Caernarvon)
TELLERS FOR THE AYES:




Mr. Probert and Mr. Cronin.




NOES


Allason, James
Campbell, Gordon (Moray &amp; Nairn)
Fell, Anthony


Alport, Rt. Hon. C. J. M.
Carr, Compton (Barons Court)
Finlay, Graeme


Amory, Rt. Hn. D. Heathcoat (Tiv'tn)
Carr, Robert (Mitcham)
Fisher, Nigel


Arbuthnot, John
Cary, Sir Robert
Fraser, Ian (Plymouth, Sutton)


Ashton Sir Hubert
Channon, H. P. G.
Freeth, Denzil


Atkins, Humphrey
Chataway, Christopher
Gammans, Lady


Balniel, Lord
Cole, Norman
Gardner, Edward


Barber, Anthony
Collard, Richard
George, J. C. (Pollok)


Barlow, Sir John
Cooper-Key, Sir Neill
Gibson-Watt, David


Barter, John
Cordeaux, Lt.-Col. J. K.
Glover, Sir Douglas


Batsford, Brian
Cordie, John
Glyn, Dr. Alan (Clapham)


Batter, Sir Beverley, Southgate)
Corfield, F. V.
Glyn, Sir Richard (Dorset, N.)


Bennett, F. M. (Torquay)
Costain, A. P.
Godber, J. B.


Bennett, Dr. Reginald (Gos &amp; Fhm)
Courtney, Cdr. Anthony
Goodhew, Victor


Berkeley, Humphry
Craddock, Sir Beresford
Gower, Raymond


Bevins, Rt. Hon. Reginald (Toxteth)
Critchley, Julian
Grant, Rt. Hon. William (Woodside)


Bidgood, John C.
Crosthwaite-Eyre, Col. O. E.
Green, Alan


Biggs-Davison, John
Cunningham, Knox
Hall, John (Wycombe)


Bingham, R. M.
Curran, Charles
Hamilton, Michael (Wellingborough)


Bishop, F. P.
Currie, C. B. H.
Harris, Reader (Heston)


Bossom, Clive
Dalkeith, Earl of
Harrison, Brian (Maidon)


Bourne-Arton, A.
Dance, James
Harvie Anderson, Miss


Box, Donald
d'Avigdor-Goldsmid, Sir Henry



Boyle, Sir Edward
de Ferranti, Basil
Hay, John


Brewis, John
Donaldson, Cmdr. C. E. M.
Heald, Rt. Hon. Sir Lionel


Bromley-Davenport, Lt.-Col. W. H.
Drayson, G. B.
Hendry, Forbes


Brooman-White, R.
Duncan, Sir James
Hicks Beach, Maj. W.


Browne, Percy (Torrington)
Eden, John
Hiley, Joseph


Bryan, Paul
Elliott, R. W.
Hill, J. E. B. (S. Norfolk)


Bullard, Denys
Emery, Peter
Hirst, Geoffrey


Burden, F. A.
Emmet, Hon. Mrs. Evelyn
Hobson, John


Butcher, Sir Herbert
Farey-Jones, F. W.
Hocking, Philip N.


Campbell, Sir David (Belfast, S.)
Farr, John
Holland, Philip







Hopkins, Alan
Marlowe, Anthony
Smith, Dudley(Br'ntf'rd &amp; Chiswick)


Hornby, R. P.
Marshall, Douglas
Smithers, Peter


Hornsby-Smith, Rt. Hon. Patricia
Mathew, Robert (Honiton)
Spearman, Sir Alexander


Howard, Gerald (Cambridgeshire)
Matthews, Gordon (Meriden)
Stevens, Geoffrey


Hughes Hallett, Vice-Admiral John
Mills, Stratton
Steward, Harold (Stockport, S.)


Hughes-Young, Michael
Montgomery, Fergus
Stodart, J. A.


Hulbert, Sir Norman
Morgan, William
Storey, Sir Samuel


Hutchison, Michael Clark
Mott-Radclyffe, Sir Charles
Studholme, Sir Henry


Iremonger, T. L.
Nabarro, Gerald
Summers, Sir Spencer (Aylesbury)


Irvine, Bryant Godman (Rye)
Neave, Airey
Talbot, John E.


Jackson, John
Nicholls, Harmar
Tapsell, peter


James, David
Noble, Michael
Taylor, Sir Charles (Eastbourne)


Jenkins, Robert (Dulwich)
Nugent, Sir Richard
Taylor, W.J. (Bradford, N.)


Johnson, Dr. Donald (Carlisle)
Oakshott, Sir Hendrle
Teeling, William


Johnson, Eric (Blackley)
Ormsby Gore, Rt. Hon. D.
Temple, John M.


Johnson Smith, Geoffrey
Orr-Ewing, C. Ian
Thomas, Leslie (Canterbury)


Jones, Rt. Hn. Aubrey (Hall Green)
Osborn, John (Hallam)
Thomas, Peter (Conway)


Joseph, Sir Keith
Osborne, Cyril (Louth)
Thompson, Kenneth (Walton)


Kerans, Cdr. J. S
Page, Graham
Thornton-Kemsley, Sir Colin


Kerby, Capt. Henry
Panned, Norman (Kirkdale)
Tiley, Arthur (Bradford, W.)


Kerr, Sir Hamilton
Partridge, E.
Turner, Colin


Kimball, Marcus
Pearson, Frank (Clitheroe)
Turton, Rt. Hon. R. H.


Kirk, Peter
Peel, John
van Straubenzee, W. R.


Kitson, Timothy
Percival, Ian
Vaughan-Morgan, Sir John


Lancaster, Col. C. G.
Pickthorn, Sir Kenneth
Vickers, Miss Joan


Leather, E. H. C.
Pike, Miss Mervyn
Wakefield, Edward (Derbyshire, W.)


Leavey, J. A.
Pitman, I. J.
Wakefield, Sir Wavell (St. M'lebone)


Legge-Bourke, Sir Harry
Pitt, Miss Edith
Wall, Patrick


Lewis, Kenneth (Rutland)
Powell, J. Enoch
Watkinson, Rt. Hon. Harold


Lilley, F. J. P.
Price, David (Eastleigh)
Watts, James


Lindsay, Martin
Prior, J. M. L.
Wells, John (Maidstone)


Linstead, Sir Hugh
Prior-Palmer, Brig. Sir Otho
Whitelaw, William


Litchfield, Capt. John
Proudfoot, Wilfred
Williams, Dudley (Exeter)


Longbottom, Charles
Ramsden, James
Williams, Paul (Sunderland, S.)


Loveys, Walter H.
Redmayne, Rt. Hon. Martin
Wills, Sir Gerald (Bridgwater)


Low, Rt. Hon. Sir Toby
Rees, Hugh
Wise, A. R.


Lucas-Tooth, Sir Hugh
Rees-Davies, W. R.
Wolrige-Gordon, Patrick


MacArthur, Ian
Renton, David
Wood, Rt. Hon. Richard


McLaren, Martin
Rippon, Geoffrey
Woodhouse, C. M.


McLaughlin, Mrs. Patricia
Roberts, Sir Peter (Heeley)
Woodnutt, Mark


Maclay, Rt. Hon. John
Robinson, Sir Roland (Blackpool, S.)
Worsley, Marcus


MacLeod, John (Ross &amp; Cromarty)
Robson Brown, Sir William
Yates, William (The Wrekin)


McMaster, Stanley R.
Roots, William



Macmillan, Rt. Hn. Harold(Bromley)
Scott-Hopkins, James
TELLERS FOR THE NOES:


Macmillan, Maurice (Halifax)
Shaw, M.
Colonel J. H. Harrison and


Maddan, Martin
Simon, Sir Jocelyn
Mr. Sharples 


Markham, Major Sir Frank
Skeet, T, H. H.

Clause 19.—(RESTRICTION OF RELIEF FOR LOSSES.)

The Financial Secretary to the Treasury (Sir Edward Boyle): I beg to move, in page 13, line 38, after "incurred", to insert:
by a local authority (within the meaning of section one hundred and seventy-one of the Act of 1952) or by any person".
This is a small, tidying-up Amendment which I can explain briefly. If hon. Members will look at the proviso to subsection (1) of this Clause, they will see that the proviso as at present drafted lets out losses incurred
in the exercise of functions conferred by or under any enactment …
and thus, among other things, exempts from the Clause local authorities generally.
Since the Committee stage of the Bill it has come to the notice of my right hon. Friend that the City of London is exceptional as a local authority, because its general functions are not conferred under any enactment, so that it does not

come, as the Bill is at present drafted, within the proviso to subsection (1).
This question is important to the City of London because it carries on certain activities of a trading nature in the public interest and, when losses are incurred, secures tax relief against other income. It will be common ground that all local authorities ought to be in the same position as one another, and, in order to secure this, the Amendment extends the proviso to cover losses incurred by local authorities within the meaning of Section 171 of the Income Tax Act, 1952.
Fortunately, the Income Tax Act, 1952, in Section 171 (4), gives a pretty clear definition of what is meant by "local authority", and we are therefore using that subsection for that purpose.
As I said, this is simply a tidying-up Amendment in order to ensure that all local authorities will be in the same position, and does not in any way alter the original purpose of the Clause or the proviso to the subsection.

Mr. Mitchison: As I understand the Amendment, the object is to bring in the City of London. I regret that the Conservative Party forgot the City of London, but I am glad that they have discovered their error.

Mr. Ede: I commend the language of the Financial Secretary about all local authorities being in the same position in these matters, but I am surprised to hear that the City of London, which escaped the Municipal Corporations Act, 1835, should uphold that principle and ask the Government to assert it.

Amendment agreed to.

Clause 20.—(SALE OF SHARES IN CERTAIN TRADING COMPANIES.)

The Solicitor-General: I beg to move, in page 15, line 1, after "that", to insert "the value of".
Would it also be convenient to take with this Amendment the next Amendment in line 4, Sir?

Mr. Speaker: Yes, if the House so pleases.

The Solicitor-General: It is indeed consequential on the Amendment which I am moving.
Subsection (1, b) brings within the Clause sales of shares of a company carrying on a trade if the trade is such that any one object forming part of the company's trading stock forms a substantial part of its assets. My hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) in Committee drew attention to the practical inconvenience of a test of this sort which might provide a very fruitful source of litigation, and urged that we should introduce a platform instead of the phrase "a substantial part".
The purpose of the Amendments is to substitute as a test the provision that the value of any one object forming part of the company's trading stock should amount to one-fifth or more of the value of its assets. The point was discussed in connection with Clause 21 on recommittal yesterday when the Committee approved of this change, and I commend it to the House in respect of this Clause.

7.45 p.m.

Mr. Geoffrey Stevens: Once again I have the pleasure and privilege of thanking my

hon. and learned Friend for accepting a suggestion which I made seeking to clarify the English language and thereby presumably reducing the potential livelihood of his brothers in law. I am grateful to him.

Mr. Mitchison: I would only say that it is comparatively rare for an hon. Member to be able to thank the Government twice for one suggestion.

Amendment agreed to.

Further Amendment made: In page 15, line 4, leave out "forms a substantial part of the" and insert:
amounts to one-fifth or more of the value of the net".—[The Solicitor-General.]

The Solicitor-General: I beg to move, in page 15, line 12, to leave out from "If" to "that" in line 13, and to insert:
on the surveyor certifying to the Commissioners having jurisdiction in the matter particulars showing that the case falls within the foregoing subsection, and giving notice thereof in writing to the seller, it is not shown to the satisfaction of those Commissioners".
Subsection (2) of Clause 20 as drafted brings the Clause into operation if it is not shown to the satisfaction of the Commissioners having jurisdiction in the matter that all trading stock belonging to the company at the time of the sale of shares within subsection (1) will be disposed of in the ordinary course of trade. This Amendment introduces a new condition before the Clause can run, namely, that the inspector must certify to the Commissioners having jurisdiction particulars showing that the case falls within subsection (1) and notifies the seller that he is doing so.
The Amendment serves two purposes. The first is to save unnecessary hearings by the Commissioners. The transactions in question might be clearly outside the scope of the Clause and it is undesirable that every such case should have to be brought before the Commissioners. The Amendment enables the formalities to be dispensed with in appropriate cases, because the inspector can refrain from certifying the particulars to the Commissioners.
The Amendment also serves the purpose of paving a way for the Amendment to page 16, line 34, to insert a new subsection (8), which we put down in response to a suggestion—indeed, a plea—by my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell),


which enables a prospective vendor of shares to approach the Commissioners of Inland Revenue jointly with the prospective purchaser and apply for a clearance in relation to the provisions of subsection (2). That provision would not work if the Commissioners of Inland Revenue could not give a binding clearance, and of course they could not do so if in every case the question had to be taken before the appropriate body of General Commissioners.

Mr. Mitchison: On the face of it, this Amendment stands by itself and, although it is, no doubt, preparatory to a later Amendment, we can, perhaps, discuss the later Amendment better when we come to it. On this Amendment I have nothing to say except just to inquire who the appropriate commissioners are in cases of this kind. Is it the case that, where there is no specific reference, it means the General Commissioners having jurisdiction in the area, or does it include the Special Commissioners?

The Solicitor-General: If the House will permit me to speak again in response to the hon. and learned Gentleman's question, the appropriate body of commissioners is defined in a later Amendment.

Amendment agreed to.

The Solicitor-General: I beg to move, in page 15, line 24, at the beginning to insert:
Subject to the next following subsection".
This Amendment goes with the two following Government Amendments, in page 15, lines 32 and 36. Perhaps you would permit the House to discuss them together, Mr. Deputy-Speaker.

Mr. Deputy-Speaker (Major Sir William Anstruther-Gray): Yes, I think that it would be for the convenience of the House.

The Solicitor-General: These Amendments introduce a new subsection to deal with possible hardship which might arise in certain cases where a seller of shares would, apart from the new subsection, be charged with his share of the company's notional trading profit, which is calculated normally by reference to the consideration for the shares, but where he has, in fact, made less out of the transaction than his share of the company's notional trading profit.
The House will recall that the broad scheme of Clause 20 is to take the price paid by the future controller of the company for the shares sold to him first of all as a base, to work out from that what would be the sale price for all the issued shares of the company, to treat that amount as the price received by the company for its trading stock, subject to certain adjustments, so as to arrive at a notional profit, and then to allocate an appropriate proportion of that to the shares which were sold and to tax that appropriate proportion of the profit as income of the seller of the shares.
In the ordinary way, of course, an operator will be charged with no more than the difference between what he subscribed for the shares originally and what is paid for them by the purchaser, but it is possible that that may not work in certain cases. For example, one might have an independent person who happened to buy some shares from one of the operators half way through the period when the building was in course of erection. He would then probably have to pay more than the original subscription. In those circumstances, his share of the trading profit might well prove to be more than the difference between what he paid for the shares and what he got for them. That is the first of the cases with which the new subsection is designed to deal.
There is also a possibility that, under the legislation as it stands at present, the same trading profit might, in effect, be taxed twice. For example, there might be a sale of control of a company which purported to have put up the building by way of investment. The effect of Clause 21 in such a case—Clause 21 being the one which bites on that case—would be that, if the building were to continue to be held as an investment. a charge on the sellers would be imposed under Clause 20. If the person who had acquired control on that occasion decided to sell his shares in the company to somebody else, Clauses 20 and 21 together would operate all over again.
Further, the Committee passed yesterday an Amendment to Clause 23, in page 20, line 36, designed to prevent avoidance by the device of selling shares to the ultimate controller of the company through an intermediary. In that case, it is possible that the original seller of the shares would be charged under


that Amendment and the intermediary, unless he were a dealer, could make himself liable to pay tax on the appropriate share of the company's national trading profit under Clause 20.
We have really two cases here. The first is the minority shareholder getting caught up, so to speak, in one of these colourable transactions. The second is the double charge. Paragraph (a) of the new subsection brings within its scope a seller who had, at the time of the sale, less than 5 per cent. of the shares issued by the company. The object of keeping the figure as small as that is to give a measure of protection to owners of a quite small minority of the shares. They are the people likely, we feel, to become unwittingly involved with the operators of the avoidance device in such circumstances that they do not realise a full share of the profit—the sort of case which I described a few moments ago. Paragraph (b) deals with the possibilities of a double charge and brings within the subsection any sale of shares where subsection (2)
has had effect in relation to all or any of the same trading stock on a previous sale of the shares".
The scheme of the new subsection is to give a seller who comes prima facie within its provisions the right to apply to the Commissioners of Inland Revenue for relief. In the case of the minority shareholder, he has to show that he did not acquire the shares
in pursuance of arrangements for transferring control of the company to another person".
He is, of course, the only person who is in a position to establish that fact. The Commissioners are to give such relief
as may be reasonable and just".
This follows an existing scheme under Section 66 of the Income Tax Act and, in the ordinary way, of course, the just relief will be such an adjustment as to reduce the charge to the difference between the price which the seller paid for the shares and the price for which he got them. I hope that that deals with the main points of the new subsection.

Mr. Bruce Millan: We are doing in Clause 20 something similar to what we did in Clause 25

yesterday. In the discussion on Clause 25 I said that I thought that what the Government were doing was not right. In my view, this is even more so when we come to Clause 20 and the Amendment that we are now considering.
I wish to deal particularly with the position of the seller whose shares amounted to less than 5 per cent. of the shares issued by the company. There has been confusion here of two quite unrelated things.
Perhaps it would be easier to explain it by giving a small example. If someone buys a number of shares, any sort of shares, for a certain figure, expecting a certain dividend from them, and then receives that dividend, and finds that the dividend is not quite what he expected when he bought the shares, and that the shares have come down in value, it has never been argued that the loss of value of the shares should be set off against the dividend. The dividend is a revenue profit and is taxable, but any reduction in the value of the shares is a capital loss, which is not allowed as a deduction against the taxable income. I am speaking from the ordinary point of view of a person who is not dealing in shares. That is only fair, because a capital gain, an increase in the value of the shares, is also not taxable.
8.0 p.m.
We have here a similar thing. By this Amendment, we are allowing a seller of shares to set off what really amounts to a capital loss against the profit to which he would otherwise be assessable under the terms of Clause 20. That really has the effect of allowing the seller in these circumstances to have some relief where the differences between the actual consideration for the sale of the shares and the consideration he originally paid when he bought them is less than the profit to which he is being made assessable under the present Clause.
We are here dealing with two completely different things. The Amendment which the Government made yesterday to Clause 25 and this Amendment which they are making today, dealing with this category of sellers of shares, are founded upon a misconception of the position, and I am sorry that the Government should have brought forward this Amendment to this Clause.
Quite apart from the fundamental objection in principle to what is being attempted here, there are one or two other points which are worth making. One of them is in regard to subsection (4,a) of the Amendment to line 36 which refers to the question of the number of
the shares belonging to the seller amounted to less than 5 per cent. of the shares issued by the company".
When we deal with the question when control in the company passes to the purchaser, we have, in Clause 23, certain definitions of associated parcels of shares. I think that these definitions are necessary and acceptable, but these definitions of associated parcels of shares ought to be associated in some way with this Amendment. If we have a seller who has less than 5 per cent. of the shares issued, but who has nevertheless shares which are part of an associated parcel of shares, it is surely not the Government's intention that he should escape the full rigours of Clause 20? I think that the Amendment is defective in this respect.

The Solicitor-General: I want to follow the hon. Gentleman's point, but will he say whether he is dealing with the purchaser in this case, or with the seller?

Mr. Millan: I am here dealing with the seller of shares. Under Clause 23, the shares are not necessarily dealt with individually. If the shares are associated, there is the provision for treating the shares as associated parcels of shares and for treating them as a whole. There is no similar provision in this Amendment. Each lot of shares sold by that particular individual is to be treated individually, but they may, of course, be associated parcels of shares, under the terms of Clause 23. I should have thought that the Government would have wanted to have this Amendment restricted to the categories of shares which are not part of associated parcels of shares. I am sure that that is what the Government intended, but it is not what we have got in the Amendment as it stands at present.
There is a reference in line 14 to the seller having to show
that he did not acquire his shares in pursuance of arrangements for transferring control of the company to another person.

This does not meet the point, because here we are dealing not with circumstances in which the seller acquired his shares, which are important enough, but with the circumstances in which the seller sells his shares subsequently, which is the transaction which brings the whole operation of Clause 20 into effect.
There is only one other point. In line 17, there is reference to adjustments being whatever may be "reasonable and just". The hon. and learned Gentleman said that this repeats words which appeared in Section 66 of the 1952 Act, but I should have thought that there was a nearer parallel, and that it is Clause 25 of the Bill with which we are dealing, because, as I said at the beginning, the kind of provision in these Amendments is roughly similar to one in Clause 25 which we made yesterday, and, therefore, the words "reasonable and just" do not apply at all. We have here a choice given to the person concerned to elect to substitute for the sum that would otherwise be chargeable the actual profit he made on the sale of the shares, as defined in exactly similar terms to the definition which is used in the first few words of this Amendment. It seems to me to be rather extraordinary that, in two cases dealing with roughly similar kinds of adjustments in the same Bill, we should get two different definitions of the adjustment that has to be made.

Mr. J. Enoch Powell: Whatever substance, if any, there may be in the points which the hon. Member has just made, I think that it would be right that, any rate in regard to the first of the two purposes of this new subsection, a word of recognition should be said. And perhaps this should be said on behalf of my hon. Friend the Member for Basingstoke (Mr. Freeth) and his aunt, for, if I am not mistaken, we are, in paragraph (a), dealing with the case which, in the deliberations of the Committee, we came to regard as the case of his aunt in Basingstoke.
The object here, I feel the House would agree, is a right object, and it is to take out persons who hold a minority interest—the aunt held only 2 per cent.—in the company in question, who might otherwise be within the mischief of these provisions.

Mr. Mitchison: I regard this as an unsatisfactory Amendment, and I think it particularly regrettable that it should


be brought in at such a late stage. I agree with what was said by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan), but I would add that, looking at this Clause and dealing for a moment with "Mrs. Five Per Cent."—"Mr. Five Per Cent." used to be the late Mr. Gulbenkian—I do not see what is happening. This relates to what I might call something like a dirty transaction from the point of view of tax avoidance.
Here is somebody who is innocently involved in it. There are two possible things to do in a case of that kind. One is to say, "We cannot draw quantitative lines; we cannot go into questions of innocence. The transaction is bad, and these people must take the unfortunate consequences", and then it is said that that is very hard on "Mrs. Five Per Cent". But why "Mrs. Five Per Cent"? Why not "Mrs. Two Per Cent." or, indeed, "Mrs. Ten Per Cent." or almost any other percentage? This is illogical, and I should have thought we could have taken any fixed figure in this case. It seems to me to show a reluctance by the Government to accept one or other of two propositions which are at any rate logical, and which I think could have been dealt with in other ways.
One of these propositions is that, the transaction being dirty, everybody involved must suffer the consequences. The other is that if one can show innocence in a dirty transaction, one should not suffer the consequences, but why because one happens to hold 4 or 6 per cent., as the case may be, of the shares in a company, the treatment should be different, completely passes my understanding. Now the Government say, "You have got to take your share in the sale no further". I can only believe that this is one of those cases where the Government must be going to their reactor or some similar machinery they keep in the Treasury and tossing up to find the figure. I agree it cannot be a majority, but short of that any figure could be defended on the same argument and with the same reactor.
Surely the right thing to do in a case of this kind is for the Government to make up their mind between the two alternatives. If we come to whether one is innocent or not, whether one is the

aunt, the whole aunt and nothing more, then one has to see what it is. The person in question has to show not later than six years after the transaction—a very long period for this sort of matter, I should have thought—
that he did not acquire his shares in pursuance of arrangements for transferring control of the company to another person".
I wonder whether that is quite enough. I should have thought that in a transaction of this kind there might be degrees of innocence, as it were, and that the simplest thing to have done would have been to have made the proof in that case a good bit stricter.
That is not the whole story. I have been talking about paragraph (a). I turn to paragraph (b). One has to remember that in these cases the trading stock may be all kinds of things. It is not necessarily securities or land or buildings. It may be anything within the pretty sweeping category indicated by Clause 20 (1, b). Apparently it is sufficient if subsection (2) of the Clause has had effect in relation to any of the same trading stock on a previous sale of the shares. Is that enough? I can see all kinds of combinations of stock in relation to some small part of which, on a previous sale of the shares, subsection (2) has had effect. I may be very bad at following these things, but, as to the shares: what shares? Shares amounting to 5 per cent. or 95 per cent., assuming a 5 per cent. holding? Or any shares?

The Solicitor-General: The 5 per cent. relates only to paragraph (a).

Mr. Mitchison: Yes. Well, then, what does it mean? Does it mean any of the shares of the company or the whole lot? Or what? I really find this an extremely difficult Clause to follow. It may be clearer to my hon. Friends than it is to me, but I do not like it.
I turn from that to "reasonable and just." It is all very well to leave it all to the Commissioners, but I should have thought that the Tory Party would have been a bit critical of some of these administrative decisions of a sweeping character. I had the curiosity to look up rather rapidly Section 66 of the 1952 Act, and it is about errors and mistakes. What is "reasonable and just" for a case of that kind is clear by comparison with what may be "reasonable and just" in this case.
Here it may be as clear as mud, as the phrase goes, what was reasonable and just. I should have thought that, if one meant what the hon. and learned Gentleman told us it meant, that is to say, that they should be indemnified, as it were, for the consequences of this penal Clause in relation to them, he could have put that into the Bill. It is absolutely nothing to what was called "multiple top slicing." If he can define "multiple top slicing" he can certainly define what he told us today.
Therefore, I do regard this as a most unsatisfactory Clause. I should have liked to have had the opportunity not merely to put down Amendments to it but to allow the Government to take it away and think over it again, but, of course, it is brought forward on Report. What are we to do? Accept it on the ground that it is rough and unsatisfactory justice, but that it may be on the side of justice rather than injustice? Or turn it down and leave the aunt to stew?
I feel that, on the whole, we have probably got to accept the thing, but I really do not know; and I am a little bit moved by my two hon. Friends the Members for Craigton and Gloucester (Mr. Diamond), who do not want to accept it. They think that it is such a muddle. And why not? Let us see what the views of the House are on the matter.

8.15 p.m.

Mr. Diamond: I am grateful to the Solicitor-General for deferring his reply to allow me to speak. I was about to appeal to my hon. and learned Friend the Member for Kettering (Mr. Mitchison) not to adopt his usual compromising and gentle attitude with the Government, but to fight for the rights of the Opposition.
This is a muddle-headed Clause at least, and at worst it is a deliberate attempt to fog the House and to insert into a Bill a method under which a capital loss, for no proper reason at all, is set off against a profit and, therefore, avoids tax. That is something which, in principle, which is a very important principle, we should oppose. There are various reasons for opposing this, but I will deal, first, with what my hon. Friend the Member for Glasgow, Craigton (Mr. Millan), with his critical mind, picked on immediately, and which is the same point which occurred previously.
I hope that the Government are aware that although we are objecting to it we are not objecting on grounds of drafting, however unsatisfactory the drafting may be as a result of the Government's continually vacillating and changing their mind from moment to moment and being pushed all over the place by their back benchers instead of sticking to sound tax principles. We are not objecting on those grounds, but we are objecting on the very simple ground which my hon. Friend has illustrated and which I will illustrate by the simplest arithmetic.
Let us take a figure which I am sure the Solicitor-General will understand. I buy shares at £10 each. Let us suppose they rise in value to £12 each at the point of time at which I sell them at a value of £14. For the purposes of this Clause I am then taxed on £2, the difference between the sale price and the value, in effect. The difference is £2. I do not pay tax on the increase in value from £10 to £12 because the increase is a capital increase which is not caught by this Clause.
Let us reverse that position, because this is what we are complaining about. We are not complaining at the moment that this treatment is given under which a normal rise in value is not regarded as taxable. We are complaining about the reverse a this, where the Government seek to introduce an entirely novel principle, namely, where the opposite happens, and the shares which I bought at £10 each drop in value to £9 each and I sell them—shall we say?—for £12.
According to the Government's proposals I pay tax only on £2. In fact, I have done two things. I have sustained a capital loss of £1 and I have made a revenue profit—for this purpose, taxable profit—of £3. There is no question about having made a taxable profit of £3. There is no question of having a taxable loss of £1. The point is that where I make a capital loss of £1 the Government say, in their sense of fairness, "We will allow you to set that off"; but where I make a capital loss of £1 they say, in their sense of fairness, "If you make a capital profit you pay tax on it" 
They cannot have it both ways. I do not think that I have misunderstood it, however difficult it is to apply to these words such intelligence, even perhaps limited intelligence, as I have and in the


certainly limited amount of time. That is the effect of it. The Government are combining those two.
As to treating capital profits as tax-free and capital losses as deductible for taxation purposes, I suggest to my hon. and learned Friend that that is not a principle to be swallowed in any circumstances on this side of the House. I suggest that we should object to that in the strongest terms. If it is too late for the Clause to be taken away, then we should get rid of our steam in the appropriate way, which is in the "Aye" or "No" Lobby as the case may be. That is the material point I wish to make.
There are other points of drafting which I should like to make if there were an opportunity for making the alterations. Subsection (4) reads:
Where the said amount exceeds the difference between …
As I read the Clause, what it is intended to mean is not the difference between two things but the excess of the first over the second. The assumption apparently is that the difference will always be a profit, but it need not be; it could be a deficiency. This difference has a limiting effect on the amount later brought into tax. It is, therefore, conceivable that the Government's intention will be defeated by using the word "difference", which could be a difference up or down, as opposed to the word "excess", which can mean only one thing.
For these reasons, mainly of principle and partly of drafting, I strongly object to the Clause. I endorse what has been said by my hon. and learned Friend. I, too, have looked at the errors and omissions Section in the 1952 Act, and I did not think that on this occasion the Solicitor-General was as helpful as he normally is in making only the slightest passing reference to Section 66 of the 1952 Act without telling us, at the same time, that it was an utterly irrelevant Section and has nothing to do with the principle. We are dealing here with equity—what is right and fair. Section 66 of the 1952 Act is what happens when a mistake has been made and it is necessary to put a person back into the position in which he would have been if certain events had not taken place and the years had not rolled by; and it is an almost impossible situation.
Apparently the Government have made an attempt to work it out, but have failed. They have said, "We cannot work it out and we will leave it to the Commissioners to decide what 'may be reasonable and just'." This is continuing the principle of saying, "We cannot cope with Income Tax and we will, therefore, hand it over to the executive, and somebody else will do it." That, too, is a principle to which I object.
If those are not sufficient grounds on which to vote against the Clause, I also have the strongest possible objection to the last line, for there is a full stop at the end of the line which should not be there.

The Solicitor-General: If the House will permit me, I should like to say a few words in reply to the points which have been made. The earlier points seemed to be little more substantial than the last, made by the hon. Member for Gloucester (Mr. Diamond), which, no doubt, the officials of the House will put right. I am sorry that the hon. Member threatened to vote against the Clause without waiting to hear the answer to the points which he made.
First, the hon. Members for Glasgow, Craigton (Mr. Millan) and Gloucester say that what we are doing is to allow a capital loss to be set off against taxation. There is no question here of a capital loss. The case is not, as the hon. Member suggested it was, that the seller sold for too little; it is that he bought for too much. It would be grossly unfair, when we are fixing a notional profit, to tax him on a profit which he did not make. If he can show that he bought at price A and sold at price B, it is the profit between price A and price B that we should tax.

Mr. Millan: The hon. and learned Gentleman says that the seller bought at too high a price, but that does not necessarily follow. If I buy shares at £100 and they fall to £90 it does not necessarily follow that I paid too high a price for them, any more than it necessarily follows that if I buy at £100 and the shares rise to £110 I paid too low a price. The hon. and learned Gentleman is assuming a stability in the price of shares which has no relation to actuality.

Mr. Diamond: And also assuming that the Tory Government will not put up the Bank Rate every other day.

The Solicitor-General: I must not be led away from the Clause, which is already difficult enough, to discuss the Government's fiscal policy. What we are saying is that, ordinarily speaking, we intend to convert into a taxable profit what is a capital gain under the law at the moment. We do that in what I confess is an artificial way. It is necessarily artificial, but, on the whole, it works.
In the ordinary way, the people who have been perpetrating these claims are those who have put up the building with the intention, in effect, at the end of getting rid of it—to use a neutral term—to an investment company. If they sold the building in the normal way to the investment company, they would be taxed on the profit which they made on the building because it would be the profit which they made in disposing of their trading stock. Instead, they sell the shares, and we have in some way to convert the price paid for the shares into the trading profits.
The Clause does that in the necessarily complicated way which we have discussed. For the operator, the man who puts up the building and who has probably planned this from the start, the scheme works quite reasonably, because he will be charged on no more than the difference between what he subscribes for the shares and what are paid for them by the purchaser, for the money subscribed will either have gone in expenses or capital expenditure allowed to the company in arriving at its profit or, at the end of the day, will be represented by the fixed assets of the company, the value of which is deducted, as the Bill stands, in subsection (4, a), in arriving at the notional trading profit.
It works all right in that case, but there may be an independent person who comes in half-way through the erection of the building. If he buys some shares from one of the operators half-way through the period during which the building is being put up, he will probably have to pay more than the original subscription. In those circumstances, the formula which we have laid down, and which works perfectly well in the case of the original subscriber, works unfairly, because ex hypothesi he will have paid more than the original subscription price. His share of trading profit in

these circumstances may prove to be more than the difference between what he paid for the shares and what he should get for them. It is for that reason that we think it right that he should be taxed on the profit that he did make.

8.30 p.m.

Mr. Diamond: Perhaps I may be allowed to put a rather lengthy question, as we are not allowed to speak twice on Report.
I revert to the example that the Solicitor-General gave, quite correctly, of converting back into a profit on the building what has been converted by the operators into a profit on the shares. A profit has been made on the shares and one wants to convert that back into a profit on the building. One only wants to do what the operators themselves did. They said. "We want a profit on the building of £X and we will put it on the shares." But when they come to it they do not put the £X on the original subscription cost, or the original price of the shares, but on the value of the shares at the time they conspired together to do this.
Whether, between the time when they conspire and the time when the deal is done and the £X are added to the cost of the shares instead of the building, there is a rise or a fall in the value of the shares, is either irrelevant or a capital profit that is not taxed, or is a capital loss on which no tax is allowed but is now proposed to be allowed by this Amendment.

The Solicitor-General: There is no question here of a capital profit except under the existing law. If the original subscription price of the shares is £10 and a small shareholder, coming in halfway through, pays £12, and the ultimate sale is for £14, it is playing with words—is fanciful—to say that he has made a capital loss of the difference between the £10 and the £12. It does not represent what has happened. We know what profit he has made and it would be unfair to tax him on more than that. He has not made a capital loss. The Clause does not bite if he does

Mr. Mitchison: The operator carried out half of what he intended to do and evaded the Clause to that extent. He intended to sell at £14. He sold at £12 to


some independent person, and the difference between £10 and £12 went untaxed into the operator's pocket as part of the scheme which he intended. It is being paid for by the Exchequer handing back some tax which it would otherwise have collected if the operator had stuck to the shares throughout.

The Solicitor-General: That is not what the Clause is designed to do. It is designed to strike at the circumstances in which, instead of the building being sold to somebody who is to hold it as an investment, shares are sold to somebody who is to hold the building as an investment. It has nothing to do with the sale of shares to somebody independently who merely comes into this scheme fortuitously.
That brings me to the point made by the hon. Member for Glasgow, Craig-ton (Mr. Millan) about associated parcels of shares. That is taken care of in lines 14 and 15 of the new subsection, because in the case of the minority shareholder it is incumbent upon him to show that he did not acquire his shares in pursuance of arrangements for transferring control of the company to other persons. Since the onus is on him, rightly, in this case, it seems to me to do every bit as much as is done by the definition of associated parcels of shares in Clause 23.
Before leaving that point, I shall answer the hon. and learned Gentleman, who asked why the figure of 5 per cent. had been chosen. One has to take a figure and that is a reasonable one. A little while ago the House was applauding me enthusiastically—perhaps that is a little exaggerated, but at any rate it was approving—for a proposal that instead of saying a "substantial proportion" of the assets we should say one-fifth. One might ask: "Why 20 per per cent.?" Everybody seemed to think yesterday when we discussed it, that 20 per cent was a reasonable figure. I suggest that it is perfectly reasonable to put down a specific figure of 5 per cent. for the reason which I gave—that one wants to limit it in the case of the small man in the circumstances I described.
The last point which was made by the hon. Member for Craigton, by the hon. Member for Gloucester (Mr. Diamond) and also by the hon. and

learned Gentleman was in reference to the words:
as may be reasonable and just.
They are far more appropriate to the case we have in mind than the rigid formula which we wrote into Clause 25 yesterday. Section 66 of the Income Tax Act provides for relief for a person who has paid tax on a Schedule D or Schedule E assessment which was excessive by reason of some error or mistake in his Income Tax return and enjoins the Commissioners to do what is right and just in those circumstances.
It seems to me to be every bit as appropriate in this case. In the ordinary way, to adjust relief will be such an adjustment as to reduce the charge for the difference between the price the seller paid for the shares and the price he got for them, but under this formula it will remain open to the Commissioners to take into account, for example, earlier transactions in the shares and to restrict relief if, for example, the holders of a small block of shares in a company set up for the express exploitation of the avoidance device benefit from the concession in the new subsection by selling their shares to each other before the time limit comes to make arangements for transferring control of the company to the ultimate purchaser.
It seems to give the requisite flexibility to prevent the concession, which we think it is right to make, being used for avoidance. It is not a case of handing over responsibility to the Executive, as was suggested. In the concluding paragraph of the subsection there is a provision for an appeal to the General Commissioners or to the Sepcial Commissioners and a further appeal to the courts on points of law. For all those reasons, I hope that the House will agree to the Amendment.

Mr. Millan: The hon. and learned Gentleman has explained why the words "reasonable and just" appear in this Amendment, but surely the same considerations also applied to Clause 25, with which we dealt yesterday. There is nothing in what he has said about this Amendment which does not apply with equal justice to Clause 25 where an entirely different form of words was inserted. Since some flexibility is


allowed, I hope that the Inland Revenue will conclude that a reasonable adjustment may be nil.

Mr. Deputy-Speaker: As there appears to be some controversy, I propose to put each Amendment separately.

Mr. Mitchison: On a point of order. If we were to divide on the first Amendment that would get over the difficulty

and we should be understood by the House to be dividing against the three Amendments as a body.

Mr. Deputy-Speaker: I take that to be so.

Question put, That those words be there inserted in the Bill:—

The House divided: Ayes 227, Noes 147.

Division No. 135.]
AYES
[8.39 p.m.


Allason, James
Freeth, Denzil
McLaughlin, Mrs. Patricia


Alport, Rt. Hon. C. J. M.
Gammans, Lady
Maclay, Rt. Hon. John


Amory, Rt. Hn. D. Heathcoat (Tiv'tn)
Gardner, Edward
MacLeod, John (Ross &amp; Cromarty)


Arbuthnot, John
George, J. C. (Pollok)
McMaster, Stanley R.


Ashton, Sir Hubert
Gibson-Watt, David
Macmillan, Maurice (Halifax)


Atkins, Humphrey
Glover, Sir Douglas
Maddan, Martin


Balniel, Lord
Glyn, Sir Richard (Dorset. N.)
Maginnis, John E.


Barber, Anthony
Godber, J. B.
Manningham-Buller, Rt. Hn. Sir R.


Barlow, Sir John
Goodhew, Victor
Markham, Major Sir Frank


Barter, John
Gough, Frederick
Marlowe, Anthony


Batsford, Brian
Gower, Raymond
Marshall, Douglas


Baxter, Sir Beverley (Southgate)
Grant, Rt. Hon. William (Woodside)
Mathew, Robert (Honiton)


Beamish, Col. Tufton
Green, Alan
Matthews, Gordon (Meriden)


Bennett, F. M. (Torquay)
Grimond, J.
Mawby, Ray


Berkeley, Humphry
Grimston, Sir Robert
Mills, Stratton


Bevins, Rt. Hon. Reginald (Toxteth)
Hall, John (Wycombe)
Montgomery, Fergus


Bidgood, John C.
Hamiton, Michael (Wellingborough)
Morgan, William


Biggs-Davison, John
Harris, Reader (Heston)
Mott-Radclyffe, Sir Charles


Bingham, R. M.
Harrison, Brian (Maldon)
Nabarro, Gerald


Bishop, F. P.
Harrison, Col. J. H. (Eye)
Neave, Airey


Bourne-Arton, A.
Harvie Anderson, Miss
Nugent, Sir Richard


Box, Donald
Hay, John
Oakshott, Sir Hendrie


Boyle, Sir Edward
Heald, Rt. Hon. Sir Lionel
Orr-Ewing, C. Ian


Brewis, John
Hendry, Forbes
Osborn, John (Hallam)


Bromley-Davenport, Lt.-Col. W. H.
Hicks Beach, Maj. W.
Osborne, Cyril (Louth)


Brooman-White, R.
Hiley, Joseph
Page, Graham


Browne, Percy (Torrington)
Hill, J. E. B. (S. Norfolk)
Pannell, Norman (Kirkdale)


Bryan, Paul
Hirst, Geoffrey
Partridge, E.


Bullard, Denys
Hocking, Philip N.
Pearson, Frank (Clitheroe)


Butcher, Sir Herbert
Holland, Philip
Percival, Ian


Campbell, Gordon (Moray &amp; Nairn)
Holt, Arthur
Pickthorn, Sir Kenneth


Carr, Compton (Barons Court)
Hopkins, Alan
Pike, Miss Mervyn


Carr, Robert (Mitcham)
Hornby, R. P.
Pilkington, Capt. Richard


Channon, H. P. G.
Hornsby-Smith, Rt. Hon. Patriola
Pitman, I. J.


Chataway, Christopher
Howard, Gerald (Cambridgeshire)
Pitt, Miss Edith


Cole, Norman
Howard, John (Southampton, Test)
Powell, J. Enoch


Collard, Richard
Hughes-Young, Michael
Price, David (Eastleigh)


Cooper, A. E.
Hulbert, Sir Norman
Prior, J. M. L.


Cooper-Key, Sir Neill
Hutchison, Michael Clark
Prior-palmer, Brig. Sir Otho


Cordeaux, Lt.-Col. J. K.
Iremonger, T. L.
Proudfoot, Wilfred


Cordle, John
Irvine, Bryant Godman (Rye)
Ramsden, James


Corfield, F. V.
Jackson, John
Redmayne, Rt. Hon. Martin


Costain, A. P.
James, David
Rees, Hugh


Craddock, Sir Beresford (Spelthorne)
Jenkins, Robert (Dulwich)
Rees-Davies, W. R.


Critchley, Julian
Johnson, Dr. Donald (Carlisle)
Renton, David


Crosthwaite-Eyre, Col. O. E.
Johnson, Eric (Blackley)
Ridley, Hon. Nicholas


Cunningham, Knox
Johnson Smith, Geoffrey
Rippon, Geoffrey


Curran, Charles
Joseph, Sir Keith
Roberts, Sir Peter (Heeley)


Currie, G. B. H.
Kerans, Cdr. J. S.
Robinson, Sir Roland (Blackpool, S.)


Dalkeith, Earl of
Kerr, Sir Hamilton
Robson Brown, Sir William


Dance, James
Kimball, Marcus
Roots, William


d'Avigdor-Goldsmid, Sir Henry
Kirk, Peter
Scott-Hopkins, James


de Ferranti, Basil
Kitson, Timothy
Sharples, Richard


Donaldson, Cmdr, C. E. M.
Lancaster Col. C. G.
Shaw, M.


Drayson, G. B.
Leather, E. H. C.
Simon, Sir Jocelyn


Duncan, Sir James
Leavey, J. A.
Skeet, T. H. H.


Eden, John
Legge-Bourke, Sir Harry
Smith, Dudley (Br'ntf'rd &amp; Chiswick)


Elliott, R. W.
Lewis, Kenneth (Rutland)
Smithers, Peter


Emery, Peter
Lilley, F. J. P.
Spearman, Sir Alexander


Emmet, Hon. Mrs. Evelyn
Lindsay, Martin
Steward, Harold (Stockport, S.)


Farey-Jones, F. W.
Litchfield, Capt. John
Stodart, J. A.


Farr, John
Longbottom, Charles
Storey, Sir Samuel


Fell, Anthony
Loveys, Walter H.
Studholme, Sir Henry


Finlay, Graeme
Low, Rt. Hon. Sir Toby
Summers, Sir Spencer (Aylesbury)


Fisher, Nigel
Lucas-Tooth, Sir Hugh
Talbot, John E.


Fletcher-Cooke, Charles
MacArthur, Ian
Taylor, W. J. (Bradford, N.)


Fraser, Ian (Plymouth, Sutton)
McLaren, Martin
Temple, John M.




Thomas, Leslie (Canterbury)
Wade, Donald
Wolrige-Gordon, Patrick


Thomas, Peter (Conway)
Wakefield, Edward (Derbyshire, W.)
Wood, Rt. Hon. Richard


Thompson, Kenneth (Walton)
Wakefield, Sir Waved (St. M'lebone)
Woodhouse, C. M.


Thornton-Kemsley, Sir Colin
Wall, Patrick
Woodnutt, Mark


Tiley, Arthur (Bradford, W.)
Watts, James
Worsley, Marcus


Turner, Colin
Wells, John (Maidstone)
Yates, William (The Wrekin)


Turton, Rt. Hon. R. H.
Whitelaw, William



van Straubenzee, W. R.
Williams, Dudley (Exeter)
TELLERS FOR THE AYES:


Vaughan-Morgan, Sir John
Wills, Sir Gerald (Bridgwater)
Mr. Peel and Mr. Noble.


Vickers, Miss Joan
Wise, A. R.





NOES


Abse, Leo
Herbison, Miss Margaret
Pavitt, Laurence


Ainsley, William
Hill, J. (Midothian)
Pearson, Arthur (Pontypridd)


Allaun, Frank (Salford, E.)
Hilton, A. V.
Peart, Frederick


Bacon, Miss Alice
Holman, Percy
Pentland, Norman


Baxter, William (Stirlingshire, W.)
Houghton, Douglas
Plummer, Sir Leslie


Bellenger, Rt. Hon. F. J.
Hoy, James H.
Price, J. T. (Westhoughton)


Benson, Sir George
Hughes, Cledwyn (Anglesey)
Randall, Harry


Blackburn, F.
Hughes, Emrys (S. Ayrshire)
Rankin, John


Boardman, H.
Hughes, Hector (Aberdeen, N.)
Redhead, E. C.


Bowden, Herbert W. (Leics, S.W.)
Hunter, A. E.
Reynolds, G. W.


Bowles, Frank
Hynd, H. (Accrington)
Roberts, Goronwy (Caernarvon)


Boyden, James
Hynd, John (Attercliffe)
Ross, William


Brockway, A. Fenner
Irving, Sydney (Dartford)
Short, Edward


Broughton, Dr. A. D. D.
Johnston, Douglas (Paisley)
Skeffington, Arthur


Brown, Thomas (Ince)
Jones, Dan (Burnley)
Slater, Mrs. Harriet (Stoke, N.)


Butler, Herbert (Hackney, C.)
Jones, Elwyn (West Ham, S.)
Slater, Joseph (Sedgefield)


Butler, Mrs. Joyce (Wood Green)
Jones, Jack (Rotherham)
Small, William


Castle, Mrs. Barbara
Jones, J. Idwal (Wrexham)
Snow, Julian


Corbet, Mrs. Freda
Jones, T. W. (Merioneth)
Soskice, Rt. Hon. Sir Frank


Craddock, George (Bradford, S.)
Kenyon, Clifford
Spriggs, Leslie


Cronin, John
Key, Rt. Hon. C. W.
Steele, Thomas


Crosland, Anthony
King, Dr. Horace
Stewart, Michael (Fulham)


Cullen, Mrs. Alice
Lawson, George
Stross, Dr. Barnett (Stoke-on-Trent, C.)


Davies, G. Elfed (Rhondda, E.)
Lee, Frederick (Newton)
Swingler, Stephen


Davies, Harold (Leek)
Lever, Harold (Cheetham)
Sylvester, George


Davies, Ifor (Gower)
Lever, L. M. (Ardwick)
Symonds, J. B.


Davies, S. O. (Merthyr)
Logan, David
Taylor, Bernard (Mansfield)


Deer, George
Mabon, Dr. J. Dickson
Thomas, Iorwerth (Rhondda, W.)


Dempsey, James
McCann, John
Thompson, Dr. Alan (Dunfermline)


Diamond, John
McInnes, James
Thomson, G. M. (Dundee, E.)


Dodds, Norman
McKay, John (Wallsend)
Thornton, Ernest


Driberg, Tom
Mallalieu, E. L. (Brigg)
Timmons, John


Dugdale, Rt. Hon. John
Mallalieu, J.P.W.(Huddersfield,E.)
Ungoed-Thomas, Sir Lynn


Ede, Rt. Hon. Chuter
Manuel, A. C.
Wainwright, Edwin


Edelman, Maurice
Mapp, Charles
Warbey, William


Edwards, Rt. Hon. Ness (Caerphilly)
Mason, Roy
Watkins, Tudor


Evans, Albert
Mendelson, J. J.
Weitzman, David


Fitch, Alan
Millan, Bruce
Wells, William (Walsall, N.)


Fletcher, Eric
Mitchison, G. R.
Wheeldon, W. E.


Foot, Dingle
Moody, A. S.
Whitlock, William


Fraser, Thomas (Hamilton)
Morris, John
Williams, D. J. (Neath)


Ginsburg, David
Mort, D. L.
Williams, W. R. (Openshaw)


Gourlay, Harry
Moyle, Arthur
Willis, E. G. (Edinburgh, E.)


Grey, Charles
Neal, Harold
Wilson, Rt. Hon. Harold (Huyton)


Gunter, Ray
Oliver, G. H.
Winterbottom, R. E.


Hall, Rt. Hon. Glenvil (Colne Valley)
Oram, A. E.
Yates, Victor (Ladywood)


Hamilton, William (West Fife)
Owen, Will
Zilliacus, K.


Hannan, William
Padley, W. E.



Hayman, F. H.
Parker, John (Dagenham)
TELLERS FOR THE NOES:


Healey, Denis
Paton, John
Mr. Probert and Mr. Mahon.

Further Amendments made:In page 15, line 32, leave out "the subsection" and insert:
subsection (5) of this section.

In line 36, leave out "(4)The said "values" and insert:
 (4) Where the said amount exceeds the difference between the actual consideration for the sale of the shares and the consideration for which the seller bought them (or, if he acquired them otherwise than by buying them, their value on a sale in the open market at the time when he acquired them), and—

(a) immediately before the time of the sale the shares belonging to the seller

amounted to less than five per cent. of the shares issued by the company (regard being had to any differences in the nature of the shares or the rights attaching thereto), or
(b) subsection (2) of this section has had effect, in relation to all or any of the same trading stock on a previous sale of the shares,

then if not later than six years after the end of the year of assessment the seller applies in writing to the Commissioners of Inland Revenue for relief, and, in the case of an application made only by virtue of paragraph (a) of this subsection, shows to the satisfaction of those Commissioners that he did not acquire his shares in pursuance of arrangements for transferring control of the company to another


person, the Commissioners of Inland Revenue shall give, by repayment or otherwise, such relief (if any) as may be reasonable and just.
Any applicant aggrieved by a decision of the Commissioners of Inland Revenue under this subsection may, on giving notice in writing within thirty days after the notification of the decision, appeal to the General Commissioners having jurisdiction in the matter of the assessment under this section, or if he so elects to the Special Commissioners, and the provisions of the Act of 1952 relating to such an appeal (including the provisions relating to the statement of a case for the opinion of the High Court on a point of law) shall apply with any necessary modification.
(5) The values referred to in paragraphs (a) and (b) of subsection (3) of this section.—[The Solicitor-General.]

The Solicitor-General: I beg to move, in page 16, line 34, at the end to insert:
(8) The following provisions shall have effect where in pursuance of this subsection a person proposing to sell shares in such circumstances that the sale would fall within subsection (1) of this section and the person proposing to buy the shares furnish to the Commissioners of Inland Revenue particulars of the proposed transaction, that is to say—

(a) if the Commissioners are of opinion that the particulars, or any further information furnished in pursuance of this paragraph, are not sufficient for the purposes of this subsection, they shall within thirty days of the receipt thereof notify to the said persons what further information they require for those purposes, and unless that further information is furnished to the Commissioners within thirty days from the notification or such further time as the Commissioners may allow they shall not be required to proceed further under this sub-section;
(b) subject to the foregoing paragraph, the Commissioners shall within thirty days of the receipt of the particulars, or where that paragraph has effect of all further information required, notify the said persons whether the Commissioners are satisfied that the trading stock will be disposed of as mentioned in subsection (2) of this section;

and if the Commissioners notify the said persons that they are so satisfied, the surveyor shall not give a certificate under subsection (2) of this section in respect of a sale of shares in the company by the one of the said persons to the other which is carried out within six months after the notification by the Commissioners
In discussing this Amendment, I might perhaps be allowed to discuss the Amendment, in line 36, to leave out from "seller" to "and" in line 39 and to insert:
if subsection (2) of this section had had effect".
The new subsection provides that a person who proposes to sell shares in a company which is within subsection (1)

of this Clause can, together with the prospective purchaser approach the Commissioners of Inland Revenue for a clearance in respect of the question of whether or not the transaction would be caught under subsection (2) because the trading stock will cease to be used as trading stock after the sale we put down this subsection in response to an appeal as I mentioned earlier, by my hon. Friend the member for Wolverhampton, south-west (Mr. Powell), who referred to the uncertainly of a seller of shares about his position. I promised that this was one of the matters which would be considered before Report stage.
We have had representations that people proposing to sell shares in a company which might fall within the Clause would not know how they stood and that they ought to be able to get a clearance before the transactions are completed. My right hon. Friend thinks that is a perfectly valid point, and we have sought to meet it by the clearance procedure which, of course, is well known to the House.

Mr. Mitchison: I see the point of making some provision of this sort. The Government seem to do rather better when acting in pursuance of a suggestion made by the hon. Member for Wolverhampton, South-West (Mr. Powell) than when they are acting on their own, but that, of course, is always a matter of opinion.
No doubt they have considered the point, but are the Government quite satisfied that the thirty days, which is all that the Commissioners have to come to a decision in the matter, is really sufficient? If the Commissioners do nothing for thirty days, what happens? Is the result that a clearance is taken to have been given?

The Solicitor-General: The Solicitor-General indicated assent.

Mr. Mitchison: I thought so, but one is never certain in these hard times. With, no doubt, an insufficiency of staff at any rate in some tax offices, thirty days might be a little short. Is there any power to extend the provisions or notice, or anything of that sort, or are the Government convinced that this is really enough?

Mr. Powell: This Amendment introduces the same clearance procedure to which the House has already assented in Committee in regard to Clause 27 yesterday. I should have thought that if


the Commissioners were in any doubt as to whether they had before them all that was necessary for coming to a decision, the provision for calling for further information gave them everything they needed and it would be quite wrong to widen the limits of time which are set out. I am grateful to my right hon. Friend for providing in this way what is just and proper.

Mr. Millan: This Amendment repeats the provisions to which we agreed in Clause 27 yesterday. However, in Clause 27 there is a proviso which is not repeated in the Amendment we are considering. That proviso is that if the particulars which are given with respect to the transactions that are to be carried out do not represent a full and accurate disclosure of all the facts and circumstances, the clearance procedure is void. There is no similar provision in Clause 20.
Presumably, the Government are relying on subsection (8) which gives a certain power, but there is a difference there in that subsection (8), as far as I can see, comes into operation only after six years, whereas under Clause 27 the clearance procedure can be voided at any time if the Revenue discovers that there has not been a full and accurate disclosure of the facts. Would it not have been better to have had the same sort of provision in the Amendment as in Clause 27?

The Solicitor-General: Perhaps the House will allow me to answer two specific points. There is not a deemed clearance under the subsection, like the other one, if the Commissioners do not answer in thirty days, but, of course, since Parliament will have expressed its wish in this subsection if the Amendment is accepted, they are clearly bound to do so.
With regard to the point made by the hon. Member for Glasgow, Craigton (Mr. Millan), we feel that we have in this case got the longstop of subsection (8) and that that is sufficient.

Amendment agreed to.

Further Amendment made: In page 16, line 36 leave out from "seller" to "and" in line 39 and insert:
if subsection (2) of this section had had effect".—[The Solicitor-General.]

The Solicitor-General: I beg to move, in page 17, line 16, at the end to insert:
(10) If after the sale of the shares, in a case not falling within the proviso to subsection (5) of this section, a balancing charge falls to be made in respect of any asset of the company falling within paragraph (a) of subsection (4) of this section, the amount on which the charge is made shall not exceed the aggregate of—

(a) the appropriate proportion of what would have been the maximum amount of the balancing charge if the asset had been bought by the company at the time of the sale of the shares for a price equal to the amount unallowed at the time of the sale of the capital expenditure actually incurred by the company on the construction or provision of the asset, the said maximum amount being ascertained on the footing that no initial allowance fell to be made, and
(b) the amount which apart from this subsection would be the maximum amount of the balancing charge less the appropriate proportion of that amount.

This is a rather difficult Amendment to follow. I will do my best to make plain what it is we are trying to do. The point arises out of the reference made by my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) during the Committee stage about the possibility of, in effect, a double charge to tax where a balancing charge arises.
To give an example, one might get the written-down value of the assets referred to in subsection (4, a) at, say, £800, with a market value of £1,000 and a price for the shares of £10,000. The payment is the £10,000 would, in effect, have comprised £9,000 for the trading stock, which is what we are trying to arrive at, and £1,000 for the capital allowance assets.
But under the Clause, the written-down value of £800 would be deducted from the total consideration to arrive at the price for the trading stock, so that the sellers would be charged the tax at £9,200 instead of £9,000. But the matter would go further, because on a subsequent sale of the assets, which would be for the £1,000—their market value—there would be a balancing charge of £200 on which there would be a liability to pay tax. It seemed, I think, to the whole Committee that my hon. Friend had a perfectly valid point there.
9.0 p.m.
The hon. Member for Glasgow, Craigton (Mr. Millan) followed that up by pointing out that there could be the


same anomaly by way of balancing allowance. To put that matter right by getting at the actual market value of the capital allowance assets would be a matter of appalling complication. We have therefore proceeded in a different way.
The aim is to limit the balancing charge so that the amount to be taxed under the Clause is not being taxed over again. So that we should not have to ascertain the market value of the capital allowance assets, which might be very many and very diverse, we have tried to get at it in a different way. The balancing charge is made up of two elements. The first is the annual allowance since the sale. That will not have been taken into account under the Clause. Therefore, paragraph (a) takes it into account for balancing charge purposes.
If hon. Members wish it I can spell out to the House the effect of paragraph (a), but the end product is that everything is hived off except the annual allowances which have been received by the purchaser since the sale. They obviously have not been taken into account for balancing charge purposes. It is perfectly fair to take them into account in seeking to arrive at the maximum amount of the balancing charge which may be made in the circumstances of this Clause.
In addition, where there is the sale of part only of the share capital, a proportion only of the capital allowance assets will have been effectually taken into account in the working out of the notional profit. Therefore, it is only with reference to that proportion that there is a liability to double taxation by way of balancing charge in the way that I have described.
To put it the other way round, the balance of the balancing charge not represented by this proportion should be taken into account. That is paragraph (b). What we have done is to say that paragraphs (a) and (b) should be added together to arrive at the maximum, which is the fair balancing charge, and by this means one ensures that there will be no double taxation element.
I appreciate that this is by no means an easy Amendment to understand. I think that it will be easier if I give an

example. Take a case where three-fifths of the shares were sold in a company which at the time of the sale had a capital allowance asset of a written down value of £1,000. Subsequent annual allowances of, say, £100 brought the new written down value down to £900.

Mr. Diamond: At what date does the new written down value obtain? This is an essential part of the whole transaction.

The Solicitor-General: This is before the sale. It then sells the asset for £1,100. If the asset had been bought for £1,000, the maximum balancing charge would be £100 only. The appropriate proportion of this £100 is three-fifths, which is £60, and that is picked up under paragraph (a). The balancing charge which would arise in the ordinary way is £200. That £200 is reduced by three-fifths, leaving £80. That is paragraph (b). So under the Amendment the maximum balancing charge is £60 plus £80—£140.

Mr. Stevens: When I raised this point in Committee it seemed a relatively simple one. It seemed to me that, although we intended to tax certain people who by subterfuges were avoiding taxation, we did not intend to tax them twice. That seemed a simple kind of principle. It was not until the hon. Member for Glasgow, Craigton (Mr. Millan) raised the balancing charge that I realised that there were certain difficulties, and it was not until I saw the Government's Amendment on the Paper that I realised the immensity, the complexity and the difficulties involved. I am sure that I am speaking for the entire House, and for you, Mr. Deputy-Speaker, when I express very great gratitude to my hon. and learned Friend the Solicitor-General for having made the position crystal clear to everyone except myself. I am very grateful to him.

Mr. Mitchison: There is no accounting for taste, but personally I think that this Amendment, as explained by the Solicitor-General, was rather clearer than some of the Government's Amendments. I should like to say to the hon. and learned Gentleman that had he not been such a conspicuous success at the Bar and in this House, he would have done very well indeed as a teacher, particularly in an infants' school.

Mr. Diamond: I congratulate the Solicitor-General on his very balanced statement. If he says that it is all due to the intervention of the hon. Member for Portsmouth, Langstone (Mr. Stevens), I can only suggest that his hon. Friend should go back into his bath or wherever it was he came from last night.
We are in this real difficulty, and we might as well face it. The hon. Member for Langstone raised a simple point of justice. He will not mind my saying that his disposition was to look at one side of the question only, and, quite properly, to see that the taxpayer did not get caught and have to pay twice in the case of a balancing charge. My hon. Friend the Member for Glasgow, Craigton (Mr. Millan), who has a much more objective mind and sees all sides of the question, raised the further question of the balancing allowances, and we now have this Amendment.
It fell to my lot to read and to try to understand this Amendment in case any comments had to be made on it at this stage. I studied it, I wrote out all sorts of examples and came to the conclusion that I was near to understanding, but was not fully there. I have listened to the hon. and learned Gentleman's explanation and I am now back to where I started from—if not a good deal further away than that.
To speak seriously, if this is the best that can be done we now have to take it on trust, because I am not capable of understanding the explanation given nor, as far as I know, is any other chartered accountant in the House—and I speak, at all events, for three chartered accountants. It will fall to the lot of my professional brethren outside to understand what this really means. In this House we have had the advantage of studying the Bill during its various stages and we know what it is all about. We have now listened to the explicit, clear and short statement of the Solicitor-General. How it will be operated outside, I just do not know.
Had we been at an earlier stage of the Bill, I would have suggested, with the greatest deference, that the Government might have thought about it again and found something capable of being worked by practitioners in the field. As my hon. and learned Friend the Member for Kettering (Mr. Mitchison) has said, all those who have to work in this field

find this without question the most difficult Amendment, or part of the Bill, we have yet met or, I think, ever will meet—and that includes all the problems of the "golden handshake" and the schedules thereto. In those circumstances, all one can do is to sit quietly when the vote is taken, but with the knowledge that I, for one, for the first time am utterly and completely beaten.

The Solicitor-General: Before the hon. Member for Gloucester (Mr. Diamond) intervened, I should have added something to what I said. It strikes me that in reference to the point made by the hon. Member for Glasgow, Craigton (Mr. Millan) I may have misled the House because I omitted to say something. Although we have met the point raised by my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) we have not met that put by the hon. Member for Craigton, and I meant to tell the House why.
I think that it was implicit in what I said that to meet that point would have necessitated ascertaining the market value of the capital allowance assets. As I said, those would be extremely numerous, and it would introduce an appalling complication, in the administration of what is a lesser matter, into the drafting of a Clause which, heaven knows, is already difficult enough.
What really weighed with us was that we felt that in these days it was extremely unlikely that the industrial assets would be worth less than the written-down value. In these days of very generous capital allowances—which have recently been raised, with the approbation of all parts of the House—it does not very often happen that the industrial assets are worth less than their written-down value. The point made by the hon. Gentleman was perfectly valid, but we feel that when one looks at it on the ground it is minimal, and we did not think the complication of the alternative approach involved was called for.

Several Hon. Members: Several Hon. Members rose—

Mr. Deputy-Speaker: Mr. Cooper.

Mr. Mitchison: I asked the hon. and learned Solicitor-General a question: is he willing to answer it, and—

Mr. Deputy-Speaker: Order. I have called Mr. Cooper.

Mr. A. E. Cooper: All I want to do at this stage is to enter a protest that, in this day and age, it is found necessary to introduce into the Finance Bill a Clause that is admitted on all sides to be almost incomprehensible. I am sure that we have reached a stage in Income Tax law when some serious attempt should be made to introduce legislation whereby the ordinary man in the street can understand what is going on.
Here we are, at the Report stage of the Finance Bill of 1960—the penultimate stage before it becomes law—and men and women in this House, who are of average and, perhaps, of above-average intelligence, are unable to understand what we are passing tonight. It is a deplorable state of affairs, against which I protest very sincerely.

Mr. Millan: Apart from not following the Amendment at all, I particularly do not follow the Solicitor-General's argument about balancing allowances, especially when he says that these would involve taking into account or ascertaining the market value of the assets concerned. I do not follow why with balancing allowances there should be any particular difficulty that there is not in the case of balancing charges. On the other point about balancing—

Mr. Diamond: Before my hon. Friend leaves that point, does he not think It only fair to the Solicitor-General to say that if we did introduce what my hon. Friend wants to introduce it would, as the Solicitor-General said, make this a complicated Clause?

9.15 p.m.

Mr. Millan: I dare say it would. The other point, that balancing allowances do not often arise, is valid up to a point, but there must nevertheless be many occasions, particularly when we are dealing with assets which become obsolescent very quickly because of technical changes, when unfortunately the annual allowances have not kept up with the technological position.
Apart from that, I do not understand the Amendment at all, in common with everyone else, but perhaps I may ask one or two specific questions. First, with regard to "the appropriate proportion" which appears twice in the Amendment Presumably it is intended that

"the appropriate proportion" should have the same meaning as is ascribed to it in the rest of the Clause. I would point out that the definition in Clause 20 (6) specifically refers only to subsection (3). We are now dealing with subsection (10), which is not referred to there, and which is a subsequent subsection to subsection (6). I think it is rather unfortunate, because it is not absolutely clear that "the appropriate proportion" in this subsection is the same as the "appropriate proportion" in other parts of the Clause.
I would mention two other points. First, what exactly is the significance of the phrase
the maximum amount of the balancing charge"?
I would have thought that just "the balancing charge" was sufficient without introducing the words "the maximum amount of".
Also. I should like to know what is meant in paragraph (a):
… the said maximum amount being ascertained on the footing that no initial allowance fell to be made.
What is the significance of mentioning "initial allowance" here? Among the many obscurities of this Amendment, this is one of the most obscure.

The Solicitor-General: The hon. Gentleman asked me—

Mr. Mitchison: On a point of order, Mr. Speaker. Has the hon. and learned Gentleman asked the leave of the House to speak again?

Mr. Speaker: I did not know that the hon. and learned Gentleman had already spoken more than once. No doubt, he will ask leave. What will then happen I do not know.

The Solicitor-General: I have so far asked for leave on each occasion. I had been told that I need not do so when speaking to a Government Amendment. I assure the House that I intended no discourtesy, but if I do need leave I certainly ask leave to speak again.
The first question that the hon. Member for Glasgow, Craigton (Mr. Millan) asked related to the words "appropriate proportion". Undefined as it is, it simply means that whatever proportion is decided by the General Commissioners


or the court, as the case may be, if necessary. is appropriate. I think it perfectly clear that the interpretation of the Clause will be guided by the phrase in subsection (6), although that expressly refers only to subsection (3).

Mr. J. T. Price: May I interrupt the hon. and learned Gentleman on what may be a matter of principle? How can there be equal application of the law if there is an unfettered discretion resting with the Commissioners to treat each case according to the circumstances? I always thought it was an overriding principle in all these matters that there should be equality of treatment between the various citizens dealt with. It seems to me that in these circumstances there is to be the widest discrepancy according to the whim and caprice of the people administering the law. Is that not so?

The Solicitor-General: No, that is not so at all. We have just had a Clause containing the words "as is just and reasonable", and there is certainly no question of giving a discretion to the Commissioners or leaving it to their caprice in deciding what is appropriate. As I have said, subsection (6) will clearly colour the meaning of "appropriate proportion" in this subsection. What one is seeking to do, as in the example I gave, is to find what proportion of the total shareholding has been sold, and that will be the appropriate portion.

Mr. Diamond: Will the hon. and learned Gentleman tell the House, as a lawyer, whether that is what happens in the courts? When there is in a Section a definition which specifically refers to a limited part of the Section, such as this definition in subsection (6) which is said to refer to the purposes of subsection (3), are the courts guided by that? Would not a court be likely to say that, whatever it means, it cannot mean that or Parliament would have said so directly and would have used words to include the purposes of subsection (3) and (10)?
Also, does the Solicitor-General recollect that the definition in subsection (6) is
such proportion as may be just"?
What does the hon. and learned Gentleman mean when he suggests that the court would be guided by a reference to

what may be just? This is really very difficult to understand. Would it not be much simpler to say that this is a drafting error and there should be a reference to subsections (3) and (10)?

The Solicitor-General>: I do not think that "appropriate proportion" here is susceptible of any meaning other than the meaning it has in subsection (6). The words which the hon. Member for Gloucester has quoted,
such proportion as may be just",
do not refer to the appropriate proportion except in relation to the proviso to the previous subsection, which is the exceptional case of the sale of shares of of different classes.
The second question which the hon. Member for Craigton asked related to the words "maximum amount". That follows Part X of the Income Tax Act, 1952. He will find it also, for example, in Section 293. A charge is limited to the aggregate of the allowances already given.
The hon. Gentleman had a final point on the concluding words of paragraph (a),
on the footing that no initial allowance fell to be made".
The reason for those words is that what we want to limit paragraph (a) to in the way I described is the annual allowances. I think I gave an example to the House. Perhaps I can show how it would not work unless one left the initial allowances out. I instanced the case where there was a capital allowance asset with a written-down value of £1,000 and subsequent annual allowances of £100, bringing the new written-down value to £900. The asset is then sold for £1,100. On the sale of the asset, there would, of course, be a new initial allowance. It is that which one wishes to discount, and so one fastens only on the annual allowances which have not already been taken into account in the computation carried out under subsections (2), (3) and (4) of the Clause.
Finally, I have very great sympathy with the point made by my hon. Friend the Member for Ilford, South (Mr. Cooper).

Mr. Mitchison: It was not a point; it was a bludgeon.

The Solicitor-General: Well, perhaps it was his rapier, as well as his bludgeon.
I have very great sympathy with his protest. On the other hand, the Royal Commission pointed out that in taxing Statutes we have to take a very narrow line, and, particularly in cases like this, where we want to make sure that the subject is not taxed twice in very complicated circumstances, the language is apt to be obscure. That is additionally so when we are trying to express in words what is very frequently a mathematical concept. I think that it was roughly in these words that the Royal Commission put it.
I may add that I think on one occasion Lord Simon, when Chancellor of the Exchequer, put himself in the hands of the House and said: "I am told that this is what the Clause means. I do not understand why it means that, but I hope that the House will accept it," and the House did. I feel very tempted to put myself in the hands of the House in the same way tonight.

Amendment agreed to.

The Solicitor-General: I beg to move, in page 17, line 16, at the end, to insert:
(11) In this section "the Commissioners having jurisdiction in the matter", in relation to any sale of shares in a company, means the Commissioners having jurisdiction with respect to the making of assessments under Schedule D on the company or, if more than one body of Commissioners has such jurisdiction, such of those bodies as the Commissioners of Inland Revenue may direct; and the Commissioners having jurisdiction in the matter shall in any case have jurisdiction with respect to the making of an assessment on the seller in respect of any amount in respect of which he is chargeable under this section.
Clause 20 (2) as drafted depends for its operation on whether or not it is shown to the satisfaction of the Commissioners having jurisdiction in the matter that all the trading stock of the company in question will continue to be used as trading stock after the sale of the shares. In the context, the Commissioners having jurisdiction in the matter will be the Commissioners dealing with the tax affairs of the vendor of the shares. I think this was the point which the hon. and learned Gentleman is referring to earlier. There may, of course, be different vendors within the jurisdiction of different bodies of Commissioners, and it would obviously be highly inconvenient if different bodies of Commissioners formed a different view about the material question in subsection (2).
In addition to that, it seems best to leave matters connected with the intentions of the company in question to be considered by the Income Tax Commissioners who normally deal with its position, rather than by any other body which is concerned with the tax affairs of vendors of its shares. Therefore, the Amendment provides that the Commissioners having jurisdiction in the matter shall be the Commissioners having jurisdiction with respect to making assessments under Schedule D on the company or, if more than one body, such of those as the Commissioners of Inland Revenue may direct. I am happy to think that this is an easier subsection to understand than the last.

Amendment agreed to.

Mr. Speaker: I understand that the Government do not desire to move the Amendment to page 17, line 30.

Clause 21.—(PROVISIONS AS TO CERTAIN BUILDING COMPANIES NOT CARRYING ON A TRADE.)

Mr. Graham Page: I beg to move, in page 17, line 30, at the end to insert:
Provided that this subsection shall not apply if—

(a) the shares in the company are sold by a person or persons to another company and the shares in each company are held (directly or indirectly) by the same person or by the same persons in the same proportion, or
(b) the shares are sold by one company to another company and the shares in each company are held (directly or indirectly) by the same person or by the same persons in the same proportion.

regard being had in each case to any differences in the nature of the shares or the rights attaching thereto.
Clause 21 as it stands is intended to tax the gains on the sale of shares in a building company to another similar type of company. I am putting it very briefly because I am sure that the House knows full well what is contained in that Clause. The intention of this Amendment is that where the parties are the same, the seller and purchaser, the Clause should not bite. I can, perhaps, give an example best in this way.
9.30 p.m.
There are a number of financiers who carry out the development of sites each by the means of a separate company,


and then, quite genuinely, wish to place a holding company to take over those separate companies, genuinely as an investment company. The actual individual does not change. The financier holding 99 per cent. in each of the building development companies is going to hold 99 per cent. of the shares in the holding company, holding it as an investment. As Clause 21 stands, he would be caught.
There was on the Notice Paper, if I may refer to it although it has not been called, a Government Amendment which referred only to a company being a shareholder in the building company selling its shares to an investment company. Frankly, I could not understand why that Amendment restricted the share selling individual to a company.
Therefore, the Amendment which I move covers not only the company which holds shares in the building company and disposes of those shares to the investment company but includes the individual as well. Where the individual shareholder in the building company is to have the same proportion of shares in the investment company he would by this Amendment escape the Clause as it stands.

The Solicitor-General: I think that all I need to say is that this seems to the Government an acceptable Amendment for the reasons advanced by my hon. Friend the Member for Crosby (Mr. Graham Page). I think it is right to replace with this Amendment the Government Amendment which we did not move and which related purely to transactions between companies. I promised my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) to consider this point, and I conceded that the Clause as drawn goes too far in perfectly genuine amalgamations between companies where there is no possibility of tax evasion, and for that reason I would advise the House to accept this Amendment.

Mr. Millan: I should like to ask the Solicitor-General only one question. If this is a perfectly acceptable Amendment to Clause 21, I wonder if he will explain why it is not also a perfectly acceptable Amendment to Clause 20? I should have thought that the considerations under Clause 21 might have been

roughly the same as the considerations to be taken into account under Clause 20. Why have we got this Amendment for one Clause and not the other?

Amendment agreed to.

Further Amendment made: In page 17, line 32, leave out "has".—[Mr. Diamond.]

Amendment proposed: In page 17, line 33, after "(a)", insert "has".—[Mr. Diamond.]

The Solicitor-General: I ought to have intervened on the last Amendment, and I will certainly intervene on this to thank the hon. Member for Gloucester (Mr. Diamond) for having put right the drafting of the Clause.

Mr. Mitchison: I congratulate my hon. Friend the Member for Gloucester (Mr. Diamond) on being the first hon. Member on this side of the House to secure any concession from the Government.

Amendment agreed to.

The Solicitor-General: I beg to move, in page 18, line 16, at the end to insert:
Provided that where all the shares in the company belong to another company, that other company may, by notice in writing given to the surveyor within one year after the commencement of the winding up, elect that if in the winding up the company acquires the interest or interests of the subsidiary company in the building or buildings, the foregoing provisions of this subsection shall not apply and shall be deemed not to have applied, but that if the acquiring company sells the interest or any of the interests, or grants an interest thereout, or sells an interest created thereout, that company shall be chargeable to income tax under Case VI of Schedule D on the amount which would have been its profit if the interest or interests it acquired had been trading stock acquired for the amount which under the foregoing provisions of this subsection (if they had had effect) would have been deductible in ascertaining the amount of profits or gains chargeable to tax referred to in those provisions; and if the company elects as aforesaid it shall be treated for the purpose of subsections (1) and (3) of this section as if its activities had included the erection of the building or buildings, whether or not it would otherwise have been so treated.
This is a corollary to the Amendment which we have made to this Clause, which lets out from the charge imposed by the Clause sales of shares in connection with company amalgamations involving no change of beneficial ownership. A redeployment of assets within a group of companies might well take the


form of the liquidation of subsidiary companies and of the taking into its own ownership by the parents of the subsidiary's assets; and it seems to us that in those circumstances the Clause ought not to apply, on the condition that the parent company will itself become liable to any profit which it makes on a subsequent sale of the building.

Amendment agreed to.

The Solicitor-General: I beg to move, in page 18, line 16, at the end to insert:
(4) For the purposes of this section there shall be disregarded any building provided for use, and brought into use, for the purposes of a bona fide trade carried on by the company, other than a trade of dealing in securities or land or buildings, or of developing land, or of the provision of services for the occupier of land an interest in which is held by the company.
The Amendment provides that for the purpose of determining whether or not this Clause applies there shall be disregarded any building provided for use and brought into use for the purpose of a bona fide trade carried on by a company, with the exception of certain trades in relation to which we feel that the let-out would be inappropriate. This Amendment is in response to a point made in Committee by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), which we felt to be a valid point.

Amendment agreed to.

Clause 23.—(SUPPLEMENTARY PROVISIONS AS TO SS. 20 TO 22.)

Mr. Barber: I beg to move, in page 20, line 17, after "control" to insert:
(not being sales effected before the sixth day of April, nineteen hundred and sixty).
This Clause brings within the charge imposed by Clause 20 certain sales of shares taking place before the ultimate purchaser of the company obtains control. Since Clause 20 bites only on sales of shares taking place after 5th April. 1960, the same limitation should obviously run for sales brought within Clause 20 by this Clause. The Amendment provides accordingly that subsection (1) of the Clause shall not apply to sales effected before 6th April of this year.

Amendment agreed to.

Mr. Barber: I beg to move, in page 20, line 42, at the end to insert:
(5) Where a sale of shares is effected in pursuance of a previous agreement, the time of the sale shall be taken for the purposes of the three foregoing sections and of the foregoing provisions of this section to be the time of the making of the agreement.
Clause 20 applies to sales of shares in a company taking place after 5th April of this year. It has been represented to us that under the Clause as drafted there might be some doubt whether this provision applies to the actual date of the sale or to the date on which the contract of sale was made, if earlier. It is obviously as well that this should be resolved, and that is the purpose of the Amendment.

Amendment agreed to.

Clause 24.—(TRANSACTIONS BETWEEN ASSOCIATED DEALING COMPANIES AND OTHER COMPANIES.)

Sir E. Boyle: I beg to move, in page 21, line 2, after "sixty", to insert:
and otherwise than in pursuance of an agreement made on or before that day.
We now come to Clause 24, and this first Amendment to it is one of the easier to understand of those with which the House has dealt today. As it emerged from the Committee stage, Clause 24 imposes a charge to tax in cases where a non-dealing company acquires assets from an associated dealing company, or disposes of an asset to an associated dealing company, after the 5th April. It is the Chancellor of the Exchequer's view that, without any prejudice to the principles of the Clause, we should take out of it transactions made in pursuance of an agreement made on or before 5th April, so as to make it plain that the Clause does not have any retrospective effect. That is the sole purpose of the Amendment.

Mr. Diamond: Mr. Diamond rose—

Mr. Speaker: The Question is;—

Mr. Mitchison: On a point of order. Mr. Speaker. My hon. Friend the Member for Gloucester (Mr. Diamond) was on his feet when you started to put the Question.

Mr. Speaker: I beg the hon. Gentleman's pardon. I did not see him. I have not completed putting the Question. Mr. Diamond.

Mr. Diamond: I thought that you were looking at me, Mr. Speaker, but the reflection of the light in your glasses misled me. I apologise for inconveniencing you.
I want to raise a point concerning the date of agreement. What constitutes the date of the agreement or the evidence of the agreement? An agreement is not necessarily in writing. A verbal agreement may be adduced. If it is verbally adduced—and we are dealing here with parties who, to be precise, conspire together to defeat the Inland Revenue, to manipulate their affairs to their advantage and to its disadvantage—they will not be too finnicky about saying that, within their recollection, the agreement, 'though put into effect after the Bill became an Act, was reached during a lunch at the Savoy over the third brandy before the date specified here, and, therefore, would not be covered by it. Is it sufficient that we should leave this in these rather wide words?

Sir E. Boyle: I am assured that there is a great deal of precedent for this. On the question of what constitutes an agreement, and of the date when it was reached, I am assured that that must be a point of fact to be determined by the courts, and that the wording of this Clause makes it perfectly clear what the Government and the House have in mind. The date of an agreement must be a matter for the courts to decide on the evidence in each case.

Amendment agreed to.

Sir E. Boyle: I beg to move, in page 21, line 5, after "company" to insert:
and not being securities which are shown to have been acquired in pursuance of an offer for sale to the public made by that company and in the allotment of which no preference was given to associated companies".

Mr. Speaker: It would be for the convenience of the House to consider, at the same time, the following Amendment in the name of the hon. Member for Wolverhampton, South-West (Mr. Powell) and other hon. Gentlemen, in line 8 at the end to insert:
such asset not being securities so disposed of with a view to being offered for sale to the public by the dealing company

Sir E. Boyle: That would be convenient, Mr. Speaker.
The Amendment which I am moving arises directly out of a point raised by

my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) during the Committee stage. The purpose is to take out of Clause 24 securities acquired by a non-dealing company from an associated dealing company in connection with a public offer for sale made by the associated dealing company. The point which he raised is within the recollection of the House. He raised it when moving an Amendment designed to have the effect of this one we are considering.
As I recall it, the argument he used was that it was anomalous that an investment company which acquired shares in a genuine public issue by an associated issuing house should be caught by the Clause if it realised the shares subsequently at a profit, whereas if the issue had been handled by an independent issuing house the investment company could take up the shares and remain outside the Clause. I undertook to look into the matter.
We are also considering an Amendment by my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) and some other hon. Members. That raises a separate point which my hon. Friend the Member for Walsall, South also raised on the same occasion. At that time, he moved an Amendment which would take out of the charge imposed by subsection (1, b) an investment company or other non-dealing company which sold securities to an associated dealing company to be offered for sale to the public. I think that the House will remember that in Committee I made rather less sympathetic noises in reply to my hon. Friend on that issue than on the earlier issue.
We have considered the matter since the Committee stage, and it is my right hon. Friend's view that we cannot make a concession in the second type of case without rather gravely weakening the purpose of the Clause, because it is probable that the investment company in that case has been nursing the shares until a favourable opportunity has arisen for disposing of them, so that the profit is substantially in the nature of a dealing profit.
Whereas my right hon. Friend has put down an Amendment to meet the first of the points which my hon. Friend the Member for Walsall, South raised in Committee, he does not feel that he can


meet a second without, perhaps to a damaging extent, weakening the purpose of the Clause.

9.45 p.m.

Mr. Mitchison: I confess that I am not altogether happy about the Amendment. I see the force of the arguments which the Financial Secretary put and, in view of the case he had in mind, a tolerably simple case, there is justice in the argument. However, this is a transaction between an associated company and an issuing company and it is let out if there is an offer for sale to the public and no preference given to the associated company.
That might open the door to some trouble and it is the sort of case, I should have thought, where some other sort of arrangement should have been made, because the terms of the Amendment are rather wide. I shall not, however, oppose it at this hour of the night. This is another instance of the sort of case in which, if the Amendment had been brought forward at an earlier stage, it would have been useful to have had a discussion, because that might have led to some result. This is like an Order brought up on a Prayer—we have either to accept or refuse it, and that is the difficulty with Amendments at this stage.

Sir Henry d'Avigdor-Goldsmid: I begin by expressing the thanks of my hon. Friends and myself to the Financial Secretary for meeting the first point which we raised on this subject in Committee. If I do not go into the arguments of the hon. and learned Member for Kettering (Mr. Mitchison), it is not because I am afraid to meet them, but simply for the convenience of the House. I confine myself to a few remarks about the second Amendment which you, Mr. Speaker, have kindly allowed us to discuss at the same time.
Clause 24 is aimed against the shunting of shares from an investment company to a dealing company and vice versa, the idea behind that being that shares likely to appreciate will be moved by an unscrupulous manipulator from the dealing company to the investment company, which would not be liable for taxation on capital profit, while shares liable to depreciate would be moved from the investment company to the dealing company when, if the shares

were sold at a loss, the dealing company would be able to write off that loss against its other earnings. The Government took the view that these transactions do not stand up to the light of day, by which I mean the light of a public issue. That point was fully taken, and I do not want to say any more about it.
On the second point, in Committee my hon. Friend the Financial Secretary said:
If the issue were made through a dealing company not associated with the group, the investment company would realise its profits tax free, and it is particularly anomalous to impose a charge to tax where the issue was made through the associated dealing company since the family company has only acted in the most natural way possible by going to the associated dealing company to arrange the public flotation.
My hon. Friend was putting up the case for the Clause. He then answered his own words by saying:
Once the general proposition is accepted that an investment company should be liable on profits it makes out of selling assets to the associated dealing company, it seems rather difficult to see whether there is sufficient ground for exempting this type of transaction …".—[OFFICIAL REPORT, 24th May, 1960; Vol. 624, c. 379.]
That is the point upon which I join issue with my hon. Friend. I do not accept—and I do not believe the House accepts—the proposition that a company of any sort should be made liable to taxation on its capital profits without at the same time being allowed to offset those capital profits by capital losses. In those remarks my hon. Friend is asking us to accept the proposition that an investment company which by its very nature is not allowed to offset capital losses should nevertheless be charged on a capital profit.
This proposition savours of the rather imaginary world in which we have been living in our discussion of the Bill during the last two or three months—a world where all transactions are profitable, and the only question people have to consider is how best to dispose of those profits. Those who have experience of business know that that is not the case, and that losses occur just as well. With the best intentions, and acting on the best information, many companies of the kind to which my hon. Friend the Financial Secretary referred as being nursed are not able to produce a healthy child.


Sometimes the child becomes particularly sickly and comes to an untimely end. This is a common experience, which I do not need to repeat a hundred times. That is my objection to the general proposition enunciated by my hon. Friend.
Some of the anomalies which will arise if we accept the philosophy which causes the Government to reject the second part of the Amendment are worth detailing. I know of a group of companies which includes an important industrial company, privately held, and also a dealing company, or an issuing house. Under the Bill it will not be possible for the issuing house to take any part in the eventual public flotation of this important private industrial company, because the shareholders in the investment trust which controls the industrial company will be caught for Income Tax on the capital profit resulting when those shares are sold to the public if the business is done through the issuing house. If the transaction is carried out through another issuing house, however, no mischief is done.
Another example which has also been mentioned to me is that of an investment company which has taken an interest in shares in a foreign bank. Owing to developments in the Common Market and similar matters this foreign bank says that it would like to have a quotation for its shares on the London Stock Exchange. It suggests to the investment company, which already holds some of the shares, that it will arrange a placing through the issuing house and that some of the shares from the investment company will be put in with other shares coming in to be placed.
Again this is caught and the important issuing house will have to say to its friends on the Continent, "We cannot do this business. You must go to our friends next door to do this business and then it will be free of British tax. But we should be caught for Income Tax on the capital profit which we have made in holding these shares, which we had not nursed in any way but which we have held and they have gained in strength."
It may be argued that in these circumstances nothing is easier than for important issuing houses to come to a reciprocal agreemen and arrange to

take in each other's washing. In other words, the issues which they cannot handle because of the restrictions in this Clause would be passed on then to their neighbours and vice versa. Obviously, that would be a simple arrangement to make, but it is repugnant to the sense of this House that we should put important people, doing first-class business on first-class and accepted lines, in the position of having to enter into a subterfuge of that sort.
A further point which arises, and which I wish to emphasise, is that, as hon. Members know, it very often happens that no single issuing house is responsible for one issue. There may be an important issue of shares in which a group of issuing houses combine. I need only go back to the various steel flotations in which I think nearly all the important issuing houses in London took part. I am not saying that the same situation arose in relation to Richard Thomas and Baldwins; those shares are not held in investment trusts. But I am saying that where there is a general issue in which more than one issuing house is involved we are piling up quite unnecessary legal difficulties which will have to be sorted out at great expense to all concerned in the courts and with the aid of private advisers.
I urge my hon. Friend, for those reasons, to give this matter a little more thought during the coming year to see whether the effect of publicity which attends on a public issue, and which he has admitted has a purifying effect on transactions whereby investment companies acquire shares, would not also be useful on the reverse side when an investment company sells shares.

Mr. Powell: I am sure that my hon. Friend the Financial Secretary recognises that here there is a real difficulty which has been exposed by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid). The Government have decided and are recommending the House to accept that there is no reason why an investment company should not bona fide take up shares issued to the public by its dealing parent. The converse of that proposition is that there is no reason why a company in which shares are held by an investment company should not have its shares placed


or issued to the public by the dealing company, which is the parent of that investment company. The one proposition is the converse of the other.
In both cases, as was pointed out by my hon. Friend, there is the safeguarding publicity of the fact that there is an offer to the public, and, therefore, the true value can be ascertained. I venture to join with my hon. Friend in urging on the Government the consideration of both parts of this proposition.

Amendment agreed to.

10.0 p.m.

Sir E. Boyle: I beg to move, in page 21, line 14, at the end to insert:
Provided that where, in the case of any such acquisition of assets by a company as is mentioned in paragraph (a) of this subsection or any such disposal of assets by a company as is mentioned in paragraph (b) thereof, the assets fall by virtue of a direction under section four hundred and sixty-nine of the Act of 1952 (sales etc. between associated persons) to be treated in computing the profits of the other associated company for income tax purposes as having been sold for a price other than that actually paid, the foregoing provisions of this subsection shall have effect as if the assets had been acquired or, as the case may be, disposed of for that other price instead of for the price actually paid for them.
This Amendment simply ensures that the interaction of Clause 24 of this Bill and Section 469—the "arm's length" Section—of the 1952 Income Tax Act cannot result in a double charge. My hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) referred to this possibility during the debate in Committee, and I pointed out then that he acted very properly in raising this point.
The Amendment provides that in any case within subsection (1) of this Clause where Section 469 of the 1952 Act has already been applied, the subsection shall have effect as if the assets had been transferred at the price at which they are treated as having been transferred under Section 469. That is the kind of technical but highly important point from the point of view of doing our duty to the taxpayer which is bound to come up, and I think that the whole House will be very grateful to my hon. Friend, who was absolutely right in raising this point, which needed correcting.

Mr. Powell: I am much obliged to my hon. Friend for what he has just said and for making this Amendment to the Clause, which will rule out the possibility of an unfair double charge. It is now quite clear that my hon. Friend the Financial Secretary has a very delicately graduated scale of approbation. Last night we came to a point of mine which he described as a fair point, but which he decided on Report not to meet. The next point was one raised by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) which had been described as a very fair point and it was met by an Amendment moved in by the Committee last night. Now we have a point which reaches the high order of merit of being described by my hon. Friend as absolutely right and which is about to be added.

Mr. Millan: The Amendment mentions in line 3 "paragraph (b)" in regard to disposals. I wonder if it is not possible that there could be a disposal here which would come under paragraph (a) and should also be covered by this Amendment. I wonder whether paragraph (a), dealing with a non-dealing company could cover the disposal of the assets to another associated company that is a non-dealing company acquiring assets from an associated company and subsequently disposing of them to another associated company. So far as I can see, that transaction would be covered by (a). If so, this Amendment, in addition to referring to (b) in line 3, should mention (a) to make it absolutely right.

Sir E. Boyle: I can assure the hon. Member that that difficulty could not arise. The point is that Section 469 deals with transfers of assets between associated companies, and it empowers the Commissioners of Inland Revenue to direct that assets should be treated as having been transferred at market value in computing the taxation liability both of the seller, where the asset is sold at a price below open market value, and also of the buyer when it is sold at a price above open market value. Therefore, it could be applied in both types of case under Section 469.
I could give a fairly lengthy account of exactly how the Amendment will operate. I shall certainly take note of the point made by the hon. Member, but


I can assure him that it will, in fact work all right.

Amendment agreed to.

Sir John Barlow: I beg to move, in page 22, line 5, after "right", to insert:
(other than a right arising out of the mere ownership of shares)".
It appears that subsection (4) is much wider than it seems at first sight. It appears to apply to, among other things, the depreciation in the value of shares held by a dealing company in an associated non-dealing company.
An investment dealing company is allowed to deduct from its taxable income depreciation of any shares held, to the extent that the market value of those shares falls below their cost. Shares held by a dealing company are trading stock, and their depreciation is allowed on grounds applicable to all similar trades that stock is valued for tax purposes at the lower of cost or market value.
It is, therefore, quite equitable that any depreciation suffered on shares held in an associated non-dealing company should be regarded as taxable income of the latter company, particularly as the circumstances would be beyond the control of either company and would not in any way benefit the non-dealing company. [HON. MEMBERS: "Reading."] I am trying to be as brief as possible. I know that time is very short. I admit that for that reason I have rather full notes on this very technical matter.
The tax charge would operate to the detriment not only of the dealing company but also of the minority shareholders in the non-dealing company. As the subsection stands at present, it seems to cover a far wider area than I think the Government desire. We all wish to control matters of this kind with in reason, but I think the Government are probably going very much wider than they supposed at first sight.

Sir E. Boyle: As my hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow) says, this is quite a technical matter. On the other hand, I must tell the House that this subsection is integral to the Clause and an important subsection within the Clause. An

example of the type of manipulation against which this part of the proviso to subsection (4) is aimed—this is an important case—is where a dealing company has paid its associated company for an option which has become worthless because it has expired.
As I understand the Amendment, my hon. Friend wants to say that the subsection shall apply only to a right other than a right arising out of the mere ownership of shares. I am told that in the ordinary way, if shares taken by or acquired by a dealing company in an associate dropped in value because the associate company was unsuccessful, the dealer would get a deduction for the fallen value of the shares. But that would not be a depreciation in the value of any rights subsisting against the associated company, but in respect of a depreciation in the value of the dealing company's property.
I listened to my hon. Friend's case as carefully as I could. I think that he and some others are, possibly, concerned with the chance that shares might be taken up conferring certain rights on the winding-up of an associated trading company, and that the associated company might be unsuccessful and have very little left when it went into liquidation, so that the rights conferred by the shares were of little or no value. Again, as drafted, the Clause would not have any application. The situation would not be that the company got a deduction in respect of the depreciation in value of its rights, but that, having been allowed as a trading expense in the first instance whatever it paid for the shares, it would have brought in as a trading receipt at the end of the day the lesser sum which it had in fact realised.
We have looked at the point carefully, but I do not believe that the Amendment really would be necessary In relation to any possible genuine case where no question of tax avoidance was involved. On the other hand, I must say that the Amendment could have an effect—I am sure that it is an effect which my hon. Friend never intended—in relation to a real avoidance device or intention.
For instance, a dealer might acquire preference shares in an associated company carrying the right, which would be a right arising out of the mere ownership of shares, to substantial arrears of


preference dividend. If the associated company had the funds to meet those arrears, the price of the shares would be substantially enhanced by the right to draw them. If arrangements were then made to waive the arrears of preference dividend, notwithstanding that the associated company still had funds available, the value of the shares would drop and the dealer would then get a deduction. Any case of this kind ought then to remain caught by the subsection.
On the other hand, if when the shares were acquired the associated company had no funds to meet the arrears of dividend and it was for that reason that they were waived, the value of the shares would remain unaffected, so there would not be any question of the dealing company becoming entitled to a deduction and the Clause would not apply.
Having looked into this, I do not believe that my hon. Friend's Amendment would make any difference in any genuine case not affected by the Clause, but I think that there would be dangers if we accepted the Amendment of certain avoidance tricks not being caught by the Clause. It is just for that reason that I cannot advise the House to accept the Amendment.

Sir J. Barlow: I am very much obliged to my right hon. Friend for his very full explanation. In view of his clarification of the point, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Sir E. Boyle: I beg to move, in page 22, line 12, to leave out from "received" to "income" in line 13 and to insert:
on the last day of the period
It may be convenient to the House also to take the Amendment in page 22, line 15, at the end to insert:
Provided that—

(a) where the company not being a dealing company is carrying on a trade, the said income shall, if the company so elects, not be so chargeable but shall be deemed to have been a receipt of the trade, or, if the company is carrying on more than one trade, to have been a receipt of such one of the trades as the company may choose, and, if the company is an Overseas Trade Corporation, to have been trading income;
(b) where the said company is carrying on, or was formed to carry on, a trade, then if the said right subsisting against the company was a right to the repayment of moneys lent for meeting expenditure which

has proved (in whole or in part) abortive, or the payment to the company was made for meeting such expenditure, and the expenditure is such that the company is not entitled in respect thereof to any allowance or deduction in computing losses or gains, this subsection shall not apply in so far the expenditure proved abortive.

I will, first, say a few words about the subsection and its relation to the two Amendments. Under Clause 24 (4), as we now have it, a non-dealing company, either an investment company or an ordinary trading or manufacturing company, which receives a payment from a —

Mr. Millan: On a point of order. As far as I can see, the Amendments in lines 12 and 15 are not related in any way. One deals with the assessment period and the other deals with an entirely different matter. Is it in order for us to take them together, Mr. Deputy-Speaker?

Mr. Deputy-Speaker (Sir Gordon Touche): It is a matter entirely for the convenience of the House.

Sir E. Boyle: The point is that the Amendment in page 22, line 12, is, as I shall hope to show the House, really a paving Amendment for the Amendment in line 15. That often happens in our proceedings. It will be easiest if I try to explain the Amendment in line 15 to the House and then show how the Amendment in line 12 is intended as a paving Amendment to the Amendment in line 15. It will no doubt be perfectly in order for the hon. Member for Glasgow, Craigton (Mr. Millan) afterwards to raise a question on either Amendment if he wishes to do so.
Under subsection (4), as it has now emerged from Committee, a non-dealing company which receives a payment, not otherwise taxable in its hands, from an associated dealing company which is entitled to deduct that payment in computing its profits is liable to tax on the amount of that payment under case VI of Schedule D.
The Amendment in line 15 provides that, if the non-dealing company is carrying on a trade, that company may choose, instead of being charged under case VI, to have the payment brought in as a trading receipt. Secondly, the Amendment takes out of the Clause loans to a company carrying on, or formed to carry on, a trade, to the extent that the loans have been used to meet abortive


expenditure for which the trading company is not entitled to any Income Tax relief.
This Amendment arises out of a matter raised in Committee by my hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow). My hon. Friend referred in Committee—I took a note of his point—to the effect of the Clause on the operating subsidiaries of a mining finance house. The same point has been raised with us by the British Overseas Mining Association.
As I understand the problem, it arises in this way. For example, a mining finance house which is taxed as a dealing company may make a loan to an operating subsidiary company. Then the operating subsidiary company spends the money but fails to make a success of the undertaking, and the money is lost and written off by the mining finance house.
The Clause as drafted imposes the liability under case VI of Schedule D on the subsidiary company, which may very well in these circumstances have no money at all to pay the tax. The complaint that in any such case the Clause goes too far has been a valid one just to this extent he amount loaned has effectively been lost to the group; and secondly, the recipient company gets no set-off by way of loss relief or capital allowance in respect of the expenditure. To these two extents it seems to us that this was a reasonable complaint.
10.15 p.m.
To a great extent the expenditure by the operating company will attract relief of taxation. It will either enter into the computation of a loss which, under Section 341 of the 1952 Act, may be set against other income of the year in which the loss is incurred or be carried forward to be set against future trading profits. If the expenditure were on revenue account it would come into the computation of losses in the ordinary way. If it were on capital assets which rank for capital allowances, unrelieved capital allowances can be brought into the computation of a loss relievable against other income under Section 341. But the operating company may fail to qualify for relief on the full amount of the expenditure under the Clause as at present drafted for two reasons.
First, because the loan may have been expended on a capital account on assets not ranking for capital allowances, as for example in the acquisition of mineral rights in the United Kingdom; and secondly, if there are no trading profits, losses and capital allowances of previous years cannot be set against the case VI charge.
A similar consideration could conceivably arise outside mining, although it is the mining case that we had principally in mind. That is the reason for this Amendment whereby, as I have said, if a non-dealing company is carrying on trade the company can elect instead of being charged under Case VI, to have the payment brought in as a trading receipt. The reason why this Amendment is drafted in general terms is that it could conceivably arise outside mining and we thought that it should be drafted to apply to all companies carrying on or formed in order to carry on a trade. So much for the second of the two Amendments—page 22, line 15.
The first Amendment, page 22, line 12, is really a paving Amendment. Subsection (4) applies where the dealing company becomes entitled to a deduction, in respect of a payment to a non-dealing associate, in computing its profits for any period ending after 5th April, 1960.
Under the subsection as at present drafted, the non-dealing associate is treated as receiving an equivalent payment of income for the year of assessment in which that period ends. But if a trading company elects to have the payment treated as a trading receipt, this needs to be made the receipt not of a year of assessment but of an accounting period for which the company's profits will fall to be computed.
The point of the Amendment, therefore, is to provide a precise date on which a taxable payment is to be treated as arising to the recipient company and, as the House will no doubt have gathered from the Amendment, that date is the last day of the period for which the dealing company gets a deduction. So, although the first Amendment apparently deals with a different point from that dealt with by the second Amendment, it is simply a paving Amendment to the second Amendment, which is the important one. It simply arises out of


the need that if a trading company elects one way, that is to say, to have this treated as a trading receipt, it has to be made a receipt of the accounting period for which the company's profits are to be computed.
I am sorry that this is a slightly complicated series of Amendments, but it arises out of a perfectly genuine point that has been raised, and I think that my right hon. Friend has been right to give the Amendment a slightly greater degree of generality so that it goes rather beyond the mining case.

Mr. Millan: I am not very clear about paragraph (b) of the Amendment to line 15. The Financial Secretary has explained it with particular reference to the acquisition of mining rights. He has said that if we take a mining finance company with an associated operating company and the associated operating company spends money on the acquisition of mineral rights, that would be money in respect of which it would not be entitled to any reduction or allowance or deduction in computing losses or gains. Am I to understand, if that is so, that when the money has been expended directly, in this case by the mining finance company, the same position would obtain?
If, in fact, the finance company could not deduct this expenditure in computing its profits or losses, there seems to be no reason why it should be able to do so through the intermediary of the operating company. As I understand him, the hon. Gentleman has said that if the mining finance company does not spend the money on the acquisition of mineral rights directly, but through the operating company, the paragraph will expressly permit that money to be allowed as a deduction in computing losses or gains. I think that we need a little further explanation of that.

Sir J. Barlow: Perhaps I may take this opportunity to thank my hon. Friend for meeting me as far as he has done

here. This is an extremely complicated matter, and I am very grateful to him for what he has done.

Mr. Mitchison: May I ask if my hon. Friend the Member for Glasgow, Craig-ton (Mr. Millan) can have an answer to the very pertinent question he asked?

Sir E. Boyle: First, in anticipation of his Amendment, I should like to thank my hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow) for having spotted a misprint. By leave of the House, I shall try to explain to the hon. Member for Glasgow, Craigton (Mr. Millan) the purpose of paragraph (b) of the Amendment to line 15. The point about that paragraph is that it provides for the case where the loan was spent on abortive expenditure which is not brought into the computation of loss and does not rank for capital allowance—that is, in the words of the paragraph, on expenditure in respect of which the company —and I am quoting here, because I cannot do better, from the words of the paragraph:
is not entitled … to any allowance or deduction in computing losses or gains …
As I understand it, in regard to the extent to which any such expenditure proved abortive, the loan used to meet that expenditure shall not have been brought within the charge imposed by the Clause. Paragraph (b) covers both the case where the operating company is carrying on a trade and the case where it was formed to carry on a trade but, because the project was abortive and never proved successful, it never actually started.

Mr. Millan: My point is this. If the company making the loan had spent the money itself directly, and not through the operating company, would that money have been deducted in computing profits and losses?

Sir E. Boyle: The short point on that is that the mining finance house gets a deduction for expenditure on the United Kingdom mineral rights.

Amendment agreed to.

Amendment proposed, in page 22, line 15, at end insert:


Provided that—


(a) where the company not being a dealing company is carrying on a trade, the said income shall if the company so elects, not be so chargeable but shall be deemed to have been a receipt of the trade, or, if the company is carrying on more than one trade, to have been a receipt of such one of the trades as the company may choose, and, if the company is an Overseas Trade Corporation, to have been trading income;


(b) where the said company is carrying on, or was formed to carry on a trade then if the said right subsisting against the company was a right to the repayment of moneys lent for meeting expenditure which has proved (in whole or in part) abortive, or the payment to the company was made for meeting such expenditure and the expenditure is such that the company is not entitled in respect thereof to any allowance or deduction in computing losses or gains this subsection shall not apply in so far the expenditure proved abortive.—[Sir E. Boyle.]

Question proposed, That those words be there inserted in the Bill.

Amendment to the proposed Amendment made: In line 14, after "far", insert "as".—[Sir J. Barlow.]

Proposed words, as amended, there inserted in the Bill.

Sir E. Boyle: I beg to move, in page 22 line 23 at the end to insert
(6) Any loss which a company, not being a dealing company, sustains in any transaction falling within subsection (1) of this section by virtue of paragraph (a) thereof shall be treated as being a loss to which section three hundred and forty-six of the Act of 1952 (relief in respect of losses in transactions the profits of which would be chargeable under Case VI of Schedule D) applies, so however that relief under that section for any loss to which that section applies by virtue of this subsection shall be given only to the extent that that loss can be deducted from or set off against profits arising from other transactions falling within subsection (1) of this section by virtue of paragraph (a) thereof.
The simple effect of this Amendment is that where a company sustains any loss as a result of a transaction in assets acquired from an associated dealing company, and, had a profit resulted, it would have been taxable by virtue of the provisions of subsection (1) (a) of Clause 24, the loss may be set against profits arising from other transactions falling within subsection (1) (a).
This is really a point that arose during the Committee stage, and I think that the hon. and learned Gentleman the Member for Kettering (Mr. Mitchison) will no doubt have noticed that all except one of the Amendments to Clause 24 arose out of points raised in Committee. It was raised by my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth) and by my hon. and learned Friend the Member for Warwick and Leamington (Mr. Hobson). Both hon.

Members raised the point that it was wrong that the Clause should impose a charge on profits without giving any relief for corresponding losses, and I said during the Committee stage that I would consider the point. The Clause not only taxes profits made by a non-dealing company out of a transaction in an asset which it acquired from an associated dealing company, but it also charges the profit made by a non-dealing company on disposing of an asset to an associated dealing company.
The view that my right hon. Friend has taken is that the relief should be confined to the case where the non-dealing company buys an asset from an associated dealing company and subsequently disposes of it outside the group. In such a case the loss arises after the transaction between the associated companies has taken place.
The reason that we have not gone further on this Amendment and have not gone so far as to give relief for losses incurred by a non-dealing company on disposal of an asset to an associated dealing, company, is that in that case the non-dealing company can surely choose whether it sells to its associated dealing company or through the open market. To have given relief in the case of this kind of transaction would have been an open invitation to a non-dealing company, which had a dealing associate, to dispose of any assets whose value had already fallen, so that a loss on sale was certain, through its associated dealing company so as to get a tax relief to set off against profits.
This is one of those cases where the Government have had a fairly wide course suggested to them, where we have been right to make an Amendment to the Bill to provide in the one case that


the loss may be set against profits but not to go quite as far as the Amendment which was urged in Committee.

Mr. Mitchison: While I trust that in the course of these Amendments the Government have not issued too many, sealed invitations to persons to take advantage of them, the argument that the hon. Gentleman puts forward seems to me much more reasonable than the suggestion that in any circumstances 129 Amendments to a Finance Bill on the Report stage can be justifiable on the part of any Chancellor of the Exchequer.

Mr. Millan: This Amendment is obviously fair in so far as we are dealing with the ultimate disposition of the assets of a company to someone else outside the group. That is obviously its intention.
May I raise this point once again? Are we absolutely clear that paragraph (a) does not include a subsequent disposal of assets to another associated company? It does not say
… subsequently disposes of these assets to a non-associated company or to a person not being an associated company.
Are we sure that paragraph (a) could not include a subsequent disposal of the assets

to another associated company? If it did, this Amendment would obviously leave a loophole. I do not expect an answer to this question tonight. In any case, it is probably too late now to do anything about it. I raised a similar point at an earlier stage and I did not really get an answer, but I hope there is not a loophole here.

Sir E. Boyle: By the leave of the House, I will answer the hon. Member who has raised this point on a number of occasions on this Clause. It is my belief that the Clause as now drafted will be efficient. In response to suggestions, I think that we have made one or two very reasonable Amendments to the Clause and have given concessions, but I do not think that the main effect of the Clause will be jeopardised thereby.
Incidentally. I do not think the Clause has had as much discussion as some Clauses have had. It is an important Clause from the point of view of tax avoidance, because in closing a loophole there was a real danger that we might have done injustice in some cases. It is my real hope that as a result of the representations which have been made we have got the Clause about right.

Amendment agreed to.

Clause 27.—(CANCELLATION OF TAX ADVANTAGES FROM CERTAIN TRANSAC- TIONS IN SECURITIES.)

10.30 p.m.

Mr. Powell: I beg to move, in page 24, line 23, after "transactions" to insert:
irrespective of the form thereof".
This Amendment raises a point of real importance, and I hope that my right hon. and learned Friend the Attorney-General, even if he feels unable to accept it, will give a very clear assurance on the effect of the subsection as it stands.
The House will recall that, where a taxpayer finds himself within the circumstances set out in subsection (2) as a result of a transaction in securities, then the tax consequences, namely, the annulment of the tax advantage which the remainder of the Clause brings about, fall upon him unless he can show certain things set out in subsection (1), that is to say,
that the transaction or transactions were carried out either for bona fide commercial reasons or in the ordinary course of making or managing investments "—
that is the first, and the second is
that none of them had as their main object"—
incidentally, that is faulty English because "none" is singular and the word should be "its"—
or one of their main objects, to enable tax advantages to be obtained".
I believe it to be common ground on both sides that the citizen is entitled, in going about his legitimate affairs and in carrying out legitimate transactions, to do them in such a way as to minimise his tax liabilities. He is entitled to have regard, in the way he goes about his legitimate business, to the tax consequences of what he does. What he is not entitled to do, and what this Clause among others is intended to prevent him from doing is to make a business of tax avoidance. There is a very clear distinction between the two operations.
It seems to me that there is a real danger, as the subsection is drawn, that consideration might be directed not to the matter of the transaction, so that the taxpayer would have to show that the underlying purpose of the transaction was not mainly tax avoidance, but to

the form of the transaction, with the result that, although his object was a perfectly legitimate one and the transaction had a perfectly correct business motive, nevertheless the fact that he had chosen to do it in one way rather than in another simply because that one way gave a greater tax advantage, might lead to his being caught, since it would be the main object of his choosing the one method rather than the other of the legitimate transaction that he thereby secured a tax advantage.
I cannot believe that this is the purpose of the subsection or of the Clause. I feel sure that the object the whole House has in mind is to ensure that we protect cases where the taxpayer has been going about legitimate business for which there is a good and sound reason even though he has prudently and properly carried it out in the most advantageous, or least disadvantageous, way. As I say, I hope that my right hon. and learned Friend will either accept these words to make that clear or will give the House an assurance that the result which I apprehend will not flow from the words of the subsection as they stand.

The Attorney-General: I think that I can give my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) the assurance that he wants, and I should like to give it in the clearest possible form. I cannot advise the House to accept the Amendment, first because I think that it is unnecessary, and secondly because it might have consequences which none of us desires. In the first place, I remind the House that as a result of efforts in Committee and on Report, subsection (2) has been redrafted—or will be redrafted by later Amendments—so as to cover only such transactions and their consequences as are prima facie likely to lead to tax advantages of the kind at which the Clause strikes.
If there should be a case of a genuine commercial transaction, in which some of the circumstances specified in subsection (2) are present but the tax advantage could be shown to be merely incidental, the taxpayer would be able to make his case out by reference to the substance of the transaction, whether or


not the Amendment were accepted. Even if it were disposed to put forward the contention that someone was brought within the scope of the Clause because if he had adopted another form of carrying out his business transaction he would have been liable to pay more tax, and even if there were evidence of that, I cannot believe that the Revenue would succeed either before the Special Commissioners or before the Tribunal.
Of course it is right to say that the form in which a transaction is carried out may be some evidence of the object of the transaction, but if I correctly understand the Amendment, my hon. Friend is concerned whether the Revenue will be able to make the Clause operate and to bring persons within its scope merely by saying that if they had carried out their transaction in another way, they would have been liable to pay more tax. There again, it comes right down to the substance of the matter.
If the transaction comes within subsection (2), then whether the person concerned can bring himself within the let-out provision depends upon the substance and not upon the form of the transaction. Where the substance is purely a genuine commercial object and where, if there is any tax advantage, it is incidental, then obviously the taxpayer will not find it difficult to discharge the onus of satisfying the Revenue or the Commissioners or the Tribunal that this transaction or series of transactions had not as one of its main objects the securing of a tax advantage.
My hon. Friend has clearly summarised the purpose of the Clause. It is intended to apply to those who make a business of tax avoidance. If we were to accept the Amendment it might lead to difficulties in bringing a charge under the Clause home in a case in which it ought to be applied—that is to say, a case in which transactions were carried out in a form conferring a tax advantage precisely because the obtaining of a tax advantage was one of the main objects. An argument might even be raised to try to secure the exclusion of cases which undoubtedly ought to be vulnerable under the Clause.
Let us take the type of case which has come to be known as stock stripping. It might be said that the transaction was

carried out to realise the stock to the best advantage of the shareholders, which is a bona fide commercial purpose, and that the form adopted to this end must be disregarded.
It is for those reasons that I cannot advise the House to accept the Amendment, although I hope that I have made it clear that it certainly is not the view of the Revenue that in considering the scope of the Clause attention has to be paid to the various forms in which the transaction may be carried out. It is my view, and I can say that it is the view of the Revenue, that attention must be paid to the substance of the matter and, in relation to that, while the form may be some evidence of the substance of the matter, it is not a governing consideration to regard one way in which the transaction might have been carried out as against another possible way.

Mr. Mitchison: With all due and no undue respect, I agree with every word that has fallen from the lips of the right hon. and learned Gentleman—for once. I would only ask one other thing. A slight point was mentioned by the hon. Member for Wolverhampton, South-West (Mr. Powell). The grammar of this Clause is unnecessarily bad. May I now, or at the appropriate moment, ask leave to insert two manuscript Amendments to substitute the word "its" for the word "their"?

Mr. Powell: I have listened very carefully to the reply of my right hon. and learned Friend, and it appears to me that he gave a most explicit declaration on the point of anxiety which my Amendment was designed to meet, stating quite clearly that it was to the substance of the transaction that the main objects, or one of them, would require to relate. That being so, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Mitchison: May I ask leave to introduce the following two manuscript Amendments—in page 24, line 26, to leave out the first "their" and to insert "its" and in the same line to leave out the second "their" and to insert "it"?

Mr. Deputy-Speaker (Sir Gordon Touche): I would not be prepared to accept a manuscript Amendment unless it was generally agreed.

The Attorney-General: I would like to consider that. Views on grammar may differ. I do not think that the subsection would read very happily if we were to say
… none of them had as its main object, or one of its main objects …

The Attorney-General: I beg to move, in page 24, line 30, to leave out from "if" to the end of line 31 and to insert:
(i) the transaction or transactions in securities were carried out, and
(ii) any change in the nature of any activities carried on by a person, being a change necessary in order that the tax advantage should be obtainable, was effected".
This Amendment is designed to meet a point raised by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) who raised the question whether the provisions in the Bill, which were designed to avoid retrospective operations, were, in fact, entirely satisfactory. As I said to my hon. Friend, we were not entirely satisfied with the wording of the proviso and we could not accept his Amendment because we were also not entirely satisfied with the wording of that. I hope that this Amendment, which deprives the operation of this Clause of any retrospective effect will be satisfactory to my hon. Friend and to the House.

Amendment agreed to.

The Attorney-General: I beg to move, in page 25, line 16, to leave out from the beginning to "a" in line 17.
It might be to the convenience of the House to consider with this Amendment the Amendments in lines 19, 23 and 25 and the second Amendment in line 31. They are really related Amendments. I cannot describe the first three Amendments as consequential because they are, in fact, drafting Amendments to pave the way for the last two.
All these Amendments are to subsection (2, c). The House will recollect that the Clause as originally drafted came in for considerable criticism. Some of it, I must confess, appeared to be based on a misapprehension of the content of the Clause. In Committee we moved a revised version of the subsection and in the course of our discussions I said that my right hon. Friend the Chancellor and I would carefully consider any suggestions that might be made and, where possible, improve the subsection still

further on Report. Since the Committee stage my right hon. Friend and I have, with our advisers, carefully considered what was said in Committee. It has been suggested that in the second part of paragraph (c), as revised in Committee, we were breaking new ground or entering a new field. This really is not so.
The House will remember that the main objects of Clause 27 are to stop the evasion of liability to tax by stripping a company of its assets in such a way that sums which ordinarily would be distributed by way of dividend are not so distributed and so avoid liability to tax.
10.45 p.m.
I have already given an illustration of the way in which this can be done. I need not repeat it. But one feature of some of these operations is to secure that a dividend is paid to a person or body exempt from liability to income tax. Where that happens, there is a claim for repayment by the Inland Revenue for tax notionally deducted on payments of dividend, so that a great deal, if not all, the tax paid by the company on its profits is recoverable from the Inland Revenue.
This Clause deals with dividend stripping and also with bond-washing. From the outset it was realised that it would be pointless to stop avoidance of liability to tax through dividend stripping if it left the possibility of achieving the same result by the use of the provisions of the Companies Act. I remind the House of what my right hon. Friend, the Chancellor of the Exchequer, stated in the Budget debate, when he said that the Finance Bill would cover
getting profits or reserves or assets out of companies in such a way that, in the end, the Revenue would lose the tax that has been paid, or would fail to collect tax that ought to be paid."—[OFFICIAL REPORT, 7th April, 1960; Vol. 621, c. 691.]
The last part of (c), as it stands in the Bill, endeavoured to stop evasion of tax by this form of stripping the assets of a company. On further consideration, we felt that it would assist in the comprehension of these provisions if we made provision by a separate paragraph for the stripping of the assets simpliciter. That is done by the Amendment to line 25, which gives a new sub-paragraph (d). Sub-paragraph (a) deals with cases where a person who is entitled to recover tax in respect of dividends received by him receives an abnormal amount by way of dividend.
Subparagraph (b) deals with cases where advantage is secured by persons entitled to deduct losses on securities in computing their profits. The first part of subparagraph (c)—and, if this Amendment is accepted, the whole—deals with the opposite numbers of the persons coming within (a) and (b)—that is to say shareholders who may, by surtax, benefit out of transactions in which another party gets a tax benefit, and transactions in which another party gets a tax advantage as a person entitled to repayment of tax or to relief for losses.
The Amendment proposes to leave out the words
or in connection with the distribution of profits of a company …".
It makes it clear that the person who receives the consideration specified in subparagraph (c) comes within subsection (2), and so if, as a result, he is in a position to obtain, or has obtained, a tax advantage, he may have that advantage nullified.
There is also this difference between the cases which come within (a), (b) and (c) and those which come within (d). In the former category the Revenue is in peril of losing both income tax and surtax, and in the latter it is primarily in danger of losing surtax, since company reserves which are extracted will normally have to hear income tax at the standard rate.
It has been suggested that the kind of practice in question, which was here involving profits or reserves free of Surtax, is only likely to be practised in the case of companies under close control, where shareholders were likely to be persons liable for income tax at the standard rate, and liable for Surtax also. We have studied very closely whether it would be possible to define more narrowly the scope of paragraph (d) without running the risk that that would lead to the door being opened to more tax evasion, and I would not move, nor would my hon. Friends support, any Amendment which opened the door to the continuance of tax evasion.
We considered whether we might not limit the operation of paragraph (d) to the class of company already defined by Section 245 of the Income Tax Act, 1952, but we concluded that that might leave the revenue at some risk. The definition in Section 245 of the companies which

are controlled by five or fewer persons is very narrow, and there are excluded from that definition those companies which are under the control of five persons, but which have 25 per cent. or more of their ordinary voting shares quoted or dealt in on a stock exchange.
We did not think that it would be right or wise to exclude those companies from the scope of paragraph (d); we did not think that the line should he drawn there. There might be other small public or private companies where the securing of Surtax advantages could be very material.
We have given a lot of thought to this matter and we have reached the conclusion that paragraph (d) must apply, first, to what I might call the Section 245 companies, that is to say, companies under the control of five or fewer persons; secondly, to companies under the control of five or fewer persons, but with 25 per cent. or more of their ordinary voting shares in the hands of the public; and, thirdly, to all other companies which do not have their ordinary share capital quoted by and dealt in regularly, or from time to time, on a recognised stock exchange. To that there is one exception, namely, that paragraph (d) does not apply to a company under the control of one or more companies to which paragraph (d) does not apply.
The result of the last of these Amendments is to exclude from the operation of the Clause companies—or their subsidiaries—not controlled by five or fewer persons and whose shares are authorised to be dealt in and are regularly, or from time to time, dealt in on a stock exchange.
We feel that it is inherently unlikely that companies in that category will engage in this kind of operation. Should we be wrong about that, then their actions are hardly likely to escape public notice, and further action can be taken. But, that being our considered view, we feel that we can safely narrow the scope of paragraph (d) without opening the door to tax evasion, and for those reasons I commend the Amendments to the House.
I apologise to the House for taking so long at this late hour to remind hon. Members of the structure of this Clause, which I thought essential to put the Amendments in perspective, and also in explaining what are rather lengthy Amendments.

Mr. Mitchison: Perhaps I had better not agree too much with the right hon. and learned Gentleman the Attorney-General, as that appears to have unfortunate results immediately afterwards. On this occasion, I see the point of what is being put forward, but I am not altogether clear about why this limitation is necessary, having regard to the provisions of the rest of the Clause.
If we are to deal with cases where these transactions happen in connection with the distribution of the profits of a company, why should it be limited—perhaps I missed something in the right hon. and learned Gentleman's speech—to companies of this class? It is obvious that the Government have had considerable difficulty in deciding exactly where the limits should be, and whenever that happens I feel inclined to say that somebody will be very ingenious just to get round the limit which the Government have sought to impose. Therefore, I feel some doubt about the necessity for this type of limitation. It was not suggested in Committee, and what appears to have happened is that the Government have said, "This is really a Surtax matter. We need only deal with companies where Surtax questions will arise," and have accordingly limited their Amendment.
But if it is only a Surtax matter is there any need to go into this definition of "companies"? An ordinary public company, where there is no question of an individual charge to Surtax, will not be affected. If, on the other hand, there is some possibility of an Income Tax benefit of a kind which it is desired to avoid by the earlier paragraphs it is clearly advisable not to have a limiting definition of this kind. I just do not see the object of this piece of ingenuity, and it strikes me that it is, if not an open invitation—since the Government apparently do not issue those—a sealed invitation to people to try to avoid it.
There is another point: I have always felt with these Surtax companies—to use a concise phrase—that although there is a statutory limitation its application is a matter of some difficulty, because the Revenue authorities may not always know the facts that bring a company within Section 256, which is the defining Section for the purposes of Section 245.

Therefore, I would rather not have rested any more on that type of definition than was absolutely necessary.
For those reasons, although I see the object of the concession, I wish it had been more widely drawn. Here again, we have a case where, if we have to choose between "Aye" and "No," "Aye" to the Amendment is better than "No," but it is a pity that the introduction of an Amendment at so late a stage—even if it was occasioned by proceedings in Committee—makes it difficult to suggest any alteration which will have any practical effect.

Mr. Diamond: As I understood the right hon. and learned Gentleman, he said that the Government were deliberately leaving it open to a substantial public company to enter into transactions out of which a tax advantage of this kind might be gained, and in respect of which this Clause would not apply, because, being substantial public companies, owned by more than four persons, with their shares quoted, they would be in the public eye and not likely to do this sort of thing. We agree that that is so.
But I understood the right hon. and learned Gentleman to go on to say that if, however, he was wrong in that expectation, and they did enter into transactions of this kind, further action would be taken. I was listening very carefully, but I did not fully hear him when he went on to say that further action would be taken so as to catch such a company transaction as from today.

The Attorney-General: With the leave of the House I will reply to the hon. and learned Member for Kettering (Mr. Mitchison) and the hon. Member for Gloucester (Mr. Diamond). The hon. Member for Gloucester's hearing was quite accurate. For greater accuracy he can check my remarks in tomorrow's HANSARD.

Mr. Mitchison: This is a point of importance. At the end of it, does the right hon. and learned Gentleman mean, or does he not mean, that action will be taken retrospectively in this case?

The Attorney-General: I am not in a position to commit future Chancellors of the Exchequer as to what they would do should action be taken contrary to the belief of the Government as to its likelihood.
11.0 p.m.
I now turn to the question raised by the hon. and learned Member Of course, he is quite right in saying that this kind of stripping of assets is done primarily and I think nearly always, so far as one can see, solely for Surtax purposes. He is also, therefore, quite right in saying in relation to these big companies which we are excluding from the scope of the Clause that there is no real chance of their engaging in this operation.
The hon. and learned Member asks why draw the line now? The answer simply is that we do not want to have the scope of a Clause like this larger than is necessary to meet the evil. We feel that by making this Amendment, which is narrowing it, we can do something to dispel the unnecessary alarm which has arisen and at the same time preserve what we want of this Clause, namely, to ensure that if those likely to try to carry out this kind of operation seek to do so in the future, they will receive no tax advantage from so doing. That, I think, we have done.

Amendment agreed to.

Further Amendments made: In page 25, line 19, after "company", insert "in question".

In page 25, line 23, leave out "(in any case)".

In page 25, line 25, at end insert:
or
(d) in connection with the distribution of profits of a company to which this paragraph applies, the person in question so receives as is mentioned in paragraph (c) of this subsection such a consideration as is therein mentioned".—[The Attorney-General.]

The Attorney-General: I beg to move, in page 25, line 31, at the end, to insert:
but the assets mentioned in paragraph (c) of this subsection do not include assets which (while of a description which under the law of the country in which the company is incorporated is available for distribution by way of dividend) are shown to represent a return of sums paid by subscribers on the issue of securities".
This Amendment is designed to take out of the scope of Clause 27 payments which are, in effect, returns by overseas companies of subscribers capital. Paragraph (d) of the Clause, as amended, is only intended to catch the considerations as defined in paragraph (c), representing in effect profits which the person in question receives in non-taxable form. It ought therefore to have no application

to what is, in effect, a return of subscribed capital.
The possibility that the Clause can go too wide in this respect arises in the company law of an overseas country, because that law may have the effect that certain amounts subscribed for shares are available for payment of dividends. For example, under South African law amounts subscribed for shares and put to the share account before 1952 are available for payment of dividends and would attract liability to tax as dividends if paid in this way to shareholders in the United Kingdom. If the South African company sought to escape this tax liability by making a bonus issue out of the share account the Clause would apply to impose a tax on capital paid in by the company subscribers, and it is the purpose of the Amendment to prevent that from happening.
The Amendment accordingly says that assets mentioned in paragraph (c), assets available for distribution as dividends, do not include assets shown to represent a return of sums paid by subscribers on the issue of securities, although those assets might be of a description which was or would have been available for distribution by way of dividends under the law of the country in which the company is incorporated.

Mr. Mitchison: In relation to this and to the other Amendments, one has to remember that these are considerations of the kind mentioned in subsection (1) of the Clause and that the whole transaction is thus subject to the taxpayer being able to show that the transaction or transactions were carried out for bona fide commercial reasons and so on, and that none of them had as its main object, or one of its main objects, to enable a tax advantage to be obtained.
I should have thought that in the type of case which the right hon. and learned Gentleman has in mind there would be no difficulty in showing that. Therefore, I wonder whether this Amendment is necessary. If it is not, it is a question of relieving the taxpayer of an unnecessary onus of proof. When I look at the Amendment I see that he still has to prove something in connection with this Amendment and I wonder whether a complicated proof of this kind is necessary in a subsection which follows on the subsection I have quoted, the latter


subsection (1) being the main governing subsection of the Clause.
I say that for this reason. This is a very complicated Bill and this is a fairly complicated Clause in it. The more these specific cases are put in, the more we come to cases which are just on the borderline. I can see such cases in connection with foreign law. The more we come to borderline cases the more we open the door to possibilities as much of doubt as of avoidance. I therefore would have preferred to have left the matter to the provisions of subsection (1) instead of complicating it in this way with a feeling that there would be no cases where this Amendment would apply where the taxpayer would have any difficulty in discharging the burden. If in fact it is the case that these were the transactions the main object of which was to enable tax advantages to be obtained, I feel a little doubtful whether this Amendment is right.

The Attorney-General: I speak again by leave of the House. I assure the hon. and learned Member that this is necessary for this reason. If he will look again at paragraph (c)—I think it is convenient to look at it in the Bill—the consideration is something
which either is, or represents the value of, assets which are … available for distribution by way of dividend.
That is the difficulty. Under the law overseas, as I gave the illustration, certain capital could be available for distribution under the law there by way of dividend.
That brings the case clearly within paragraph (c). This makes it quite clear that where the sum being distributed, or which is capable of being distributed, by way of dividend which is in fact a return of capital to subscribers, that does not come within the scope of paragraph (c). We have proceeded on the basis of trying to define subsection (2) as closely as possible. We feel, in view of the use of the words "by way of dividend" in Clause 27, it is essential to make this Amendment, which can apply only to companies of the character to which I have referred, so as to make quite clear where there is a return of capital it does not come within the scope of paragraph (c) because it could be distributed "by way of dividend".

Mr. Millan: Would a payment of that sort be in any way taxable without this Amendment? I should have thought it would be attributable to the return of capital and could not be taxed in any case. Is the Attorney-General saying by implication that this is something which could be taxed?

The Attorney-General: I speak again by leave of the House. I was not saying anything by implication but merely dealing with the position of overseas companies.

Amendment agreed to.

Further Amendment made: In page 25, line 31, at end insert:
and the companies to which paragraph (d) of this subsection applies are any company under the control of not more than five persons, and any other company which does not satisfy the condition that its shares or stock or some class thereof (disregarding debenture stock, preferred shares or preferred stock) are authorised to be dealt in on a stock exchange in the United Kingdom, and are so dealt in (regularly or from time to time), so however that the said paragraph (d) does not apply to a company under the control of one or more companies to which that paragraph does not apply; and subsections (2) and (3) of section two hundred and fifty-six of the Act of 1952 (which define for the purposes of that section the circumstances in which a company is to be deemed to be under the control of not more than five persons) shall apply for the purposes of this subsection as they apply for the purposes of that section"—[The Attorney-General.]

The Attorney-General: I beg to move, in page 27, line 18, to leave out from "no" to "in" in line 19 and to insert:
notice under subsection (3) of this section ought to be given.
This is a drafting Amendment consequential upon the Amendment made to Clause 3 in the course of the Committee stage when we changed the wording from "directions" to "giving notice."

Amendment agreed to.

Further Amendment made: In page 27, line 38, leave out "paragraph (a) of."—[The Attorney-General.]

The Attorney-General: I beg to move, in page 28, line 2, at the end to insert:
so however that an amount shall not be treated as abnormal by virtue only of this paragraph if during the six months beginning with the purchase of the securities the recipient does not sell or otherwise dispose of, or acquire an option to sell, any of those securities or any securities similar (within the meaning of section twenty-three of the Finance Act. 1959), to those securities.


The Amendment arises out of a promise of consideration during the debate in the Committee stage on an Amendment moved by my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth). The object is to ensure that a body entitled to tax exemption—for example, a charity or a superannuation fund—shall not be hampered by the fear of action under Clause 27 when it is contemplating a legitimate "switch" of its investments.
I need not remind the House of the history of this matter in any detail. The definition in the Amendment applies only to Clause 27 (10, a), and we have, after considering the arguments advanced by my hon. Friend and others, come to the conclusion that there is a good case for letting out of the scope of this definition purchases of fixed dividend securities if the facts of the case tend to show that the purchase was the normal purchase of an investment. For this purpose we think it is possible to take as a test that the recipient of the dividend continues to hold the securities for at least six months from the date of purchase. In the legislation of 1959 directed against specific forms of bond-washing the same six months' test was used. A cum-dividend purchase of securities was excluded from that legislation if the securities were not in any way disposed of until at least six months had passed.
The Amendment provides that a fixed dividend is not to be considered as "abnormal" under paragraph (a) of the definition if the recipient refrains from disposing of the securities for at least six months from the date of purchase. The Amendment is so worded as to impose various safeguards.
One is that if the purchaser, without actually selling the securities, takes out an option during the six months' period which would entitle him to sell them as a "pegged" price after its expiry, the let-out will not operate.
A second is that if the purchaser already owns a holding of the securities he cannot claim the benefit of the let-out for a further purchase cum-dividend merely by selling the original holding and keeping the further purchase until the six months have run out. This follows from the reference to selling
any securities … similar to those securities".

A third is that the definition of "similar" securities which is borrowed in this way from the 1959 Act is wide enough to cover cases where two holdings of securities are really equivalent for all practical purposes notwithstanding differences of outward form.
I think that we have gone as far as we can go to meet the fair point made by my hon. Friend the Member for Basingstoke and that this Amendment is an improvement to the operation of the Clause.

Mr. Denzil Freeth: It would be churlish if I let this go by without saying "Thank you" to my right hon. and learned Friend. He said that the Government have gone as far as they could go in putting down the Amendment. They have not gone quite as far as I hoped they would go, but I am most grateful to them for going as far as they have gone.

11.15 p.m.

Mr. Mitchison: I take the same objection to this provision as I did to the one I last spoke to. The whole of these circumstances are subject to the taxpayer being able to show that the transactions were carried out for bona fide commercial reasons or in the ordinary course of making or managing investments. In the particular instance the right hon. and learned Gentleman gave, the facts almost proved themselves. A pension fund obviously comes within the definition of
in the ordinary course of making or managing investments".
Another fairly obvious instance is the aunt of the 'hon. Member for Basingstoke (Mr. Denzil Freeth). She would do no wrong, ex hypothesi. She is an honest old lady making and managing her investments.
Is it really necessary to put this in? It involves putting in a fixed period of six months. The trouble about any fixed period is that the person who has done it for 5 months and 29 days feels very aggrieved because he has to prove something which a person who has done it for 6 months and 1 day does not have to prove.

Mr. Freeth: I hope that the hon. and learned Gentleman is not assuming that my aunt is a gross fund.

Mr. Mitchison: I make no further assumptions about the hon. Gentleman's aunt, other than her impeccable and continuous honesty.
I have said what I want to say. It is late at night. I wish we had had the opportunity of hearing the right hon. and learned Gentleman's explanations about these Clauses at an earlier stage when we might have been less lenient towards them.

Mr. Diamond: I want to ask the Attorney-General only one question. Is he satisfied that the period of six months is sufficient? In introducing the Amendment he said that it followed on a period introduced in a Section in an earlier Act, of which no doubt the Inland Revenue has some experience. Does his experience lead him to believe—I have certain doubts about it—that six months is long enough? There is no objection to accepting the Amendment. Its purpose is understood, but it would have been a much safer Amendment from the point of view of the Inland Revenue if the six months period had been much longer.

The Attorney-General: With the leave of the House, my answer to the hon. and learned Gentleman is that his argument always supposes that most weight should be placed on the let-out. His answer to these proposed Amendments is to ask whether they are necessary. He says that the taxpayer could get out under the let-out.
Our approach is somewhat different. We are trying to shape the Clause so that many cases which ought not to come within its scope are excluded from its scope. The last Amendment was one of those cases. This Amendment amends the definition of "abnormal dividend". Subsection (2. c) says:
the person in question receives, in consequence of a transaction whereby any other person—

(i) subsequently receives, or has received, an abnormal amount by way of dividend. …"

Under our first choice of words many dividends would have satisfied that definition. It might be difficult for charities in some cases to operate the let-out Clause. But there was a real difficulty of definition, namely, what was meant by "abnormal". That is all the

Amendment seeks to do. We have followed the precedent in that respect of holding for a six months period. We would not have done so if past experience in relation to that test had proved unsatisfactory.

Amendment agreed to.

The Attorney-General: I beg to move, in page 28, line 5, at the end to insert:
Provided that there shall be disregarded any amount received by a company by way of dividend from an associated company except in so far as the dividend is paid out of profits accumulated before the two companies became associated companies; and the Third Schedule to the Finance (No. 2) Act, 1955, shall with the necessary modifications apply for determing the extent to which a dividend was so paid.
This is a drafting Amendment.

Mr. Diamond: I am prepared to accept that this is a drafting Amendment, but if the learned Attorney-General Would—

The Attorney-General: I am sorry, Mr. Speaker, but I thought that we had gone a little farther than we have. It is correct to say that this Amendment is of a drafting nature, but I should like to say a word or two about it with the leave of the House.
It is an Amendment which merely provides that we let out of subsection 2 (a) abnormal dividends drawn by a loss-making company in a group on shares which it holds in another company in the group to the extent that the dividend comes out of profits accumulated after the dividend-paying company and the loss-making company become members of the same group. I should never have described that as merely a drafting Amendment, but I had temporarily lost my place.

Mr. Mitchison: The right hon. and learned Gentleman said "after", but I think he meant "before" the two companies had become associated companies. His sense of time seems to have become a little deficient.

Amendment agreed to.

Further Amendment made: In page 28, line 24, to leave out from "whether" to end of line 25 and insert:
a notice under subsection (3) of the foregoing section should be given in respect of him".—[Sir E. Boyle.]

Clause 31.—(RECEIPTS ACCRUING AFTER DISCONTINUANCE OF TRADE, PRO- FESSION OR VOCATION.)

Sir E. Boyle: I beg to move, in page 29, line 6, after "vocation", to insert:
during any period before the discontinuance (not being sums otherwise chargeable to tax)".
I think it might be for the convenience of the House if we also considered the next four Amendments to Clause 31.
The purpose of these Amendments is to guard against a possible misinterpretation, which I will explain in a few words. The first of this series of Amendments states that the Clause will apply only to sums not otherwise chargeable to tax; this is a Clause on which, if I remember rightly, we had some controversial discussion during the Committee stage, when the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) had something to say about it. The Clause does not seek to tax a receipt which has escaped a charge to tax merely because at some stage in the life of the business the earnings basis was not adopted.
The Clause could be incorrectly interpreted as meaning that, if at any time during the life of the business the earnings basis was used, post-cessation receipts arising because the taxpayer was subsequently put on a cash basis were chargeable to tax. The Clause in the original form lent itself to this interpretation. That was because subsection (2) says that where the profits or gains for any period before discontinuance were computed by reference to earnings, all post-cessation receipts are to be taxed under the Clause in so far as they were not brought into account in computing the profits or gains for that period or any subsequent period.
As those words stood, it could be maintained that where a professional man started off by being assessed on the earnings basis and then changed to the cash basis, all his post-cessation receipts would be taxable because they were not brought into account for a period during which the cash basis operated and because there was a period when he was assessed on the earnings basis.
Indeed, since the publication of the Bill, this interpretation appears to have been quite widely adopted. It has given rise to considerable misunderstanding about the scope of the Clause, and it is for that reason that we are now moving the Amendments. We are, I think, all

clear as to the purport of the Clause, but we are ensuring that, whatever view hon. Members take, the Clause does in fact do what it is intended to do.
There is one other point. The insertion in the Clause, by way of the Amendment to page 29, line 6, of the words:
not being sums otherwise chargeable to tax
is desirable to make it clear that the Clause in no way affects the position of sums chargeable to tax under the existing law. A person who buys from an author an interest in copyright is already taxable on the royalties arising therefrom. Incidentally the recommittal Amendment to Clause 32, page 30, line 20, ensures that if a retired trader or professional man sells the right to any post-cessation receipt, the sum chargeable under the Clause is the consideration which he receives for the assignment. It follows that the person to whom it is assigned cannot be charged.
An argument might be advanced that the purchaser of the right to receive royalties had acquired the right to sums arising from the carrying on of the author's profession, and that the provision of Clauses 31 and 32 taken together mean that he could not be charged to tax on the royalties as they come in. By specifying, as we are doing in this first Amendment, that the Clause shall not apply to sums otherwise chargeable to tax—that is the second half of the Amendment to page 29, line 6—we secure that no such argument could be sustained. It is for those two reasons, and not to make any alteration in the substantive meaning of the Clause, that we have put down these Amendments.

Sir Henry d'Avigdor-Goldsmid: Having heard many speeches from the Financial Secretary, I should like to tell him that I have heard none from him in the last few days which have given me so much satisfaction as the last one. I should like to thank him unreservedly.

Mr. Mitchison: That is very nice. I should like simply to say that, apart from the sufficiency or insufficiency of the Clause as a whole, which we are not discussing now, these two points are points on which I agree with the hon. Gentleman. The sense of the Committee was that which has been indicated and clarified by these Amendments.

Amendment agreed to.

Further Amendments made: In page 29, line 7, leave out "any period before the discontinuance" and insert "that period."

In line 11, leave out "that period or any subsequent" and insert "any."

In line 13, leave out from "where" to "were" in line 14 and insert: "those profits or gains."

In line 16, leave out "that period" and insert:
any period before the discontinuance."—[Sir E. Boyle.]

Sir E. Boyle: I beg to move, in page 29, line 41, to leave out from "itself)" to "and" in line 44 and to insert:
which, if the trade, profession or vocation had not been discontinued, would have been deducted in computing for tax purposes the profits or gains of the person by whom it was carried on before the discontinuance, or would have been deducted from or set off against those profits or gains as so computed.
This is a drafting Amendment which covers two points which I ought briefly to explain. As the House is aware, subsection (4, a) of Clause 31 is intended to allow the taxpayer to set off against any post-cessation receipt post-cessation expenses and any unrelieved loss of business at the time of discontinuance. During the Committee stage my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) suggested that the wording of the subsection was not sufficient to allow a deduction for unrelieved losses. My right hon. and learned Friend the Attorney-General, in winding up the debate, said that he would look at the drafting.
11.30 p.m.
There was, I think, a real doubt on this point, for the following reason. As originally drafted, subsection (4, a) provided for a deduction for any loss which would have been deducted in computing the taxable profits of the business if it had not been discontinued; but Section 342 of the 1952 Act provides that such losses may be deducted from or set off against the profits on which the taxpayer is assessed—that is to say, the loss is not deducted in computing the assessable profits but is set against those profits after they have been computed.
This Amendment puts the matter beyond a peradventure by making subsection (4, a) refer to a loss, expense or debit which would have been deducted

in computing the profits of the business during its life or would have been deducted from or set off against those profits as so computed.
While we were at it, we took the opportunity also to remedy another defect in the subsection. In effect, it referred to loss, expense or debits incurred by the person chargeable in respect of post-cessation receipts; and, therefore, the original wording might have failed to give an executor who got in a post-cessation receipt, and was charged under the Clause, relief for losses or expenses incurred by the professional man himself. To remedy this, the Amendment makes the subsection refer to losses and expenses which would have been allowed in computing the profits of the person by whom the business was carried on. Once again, this does not in any way alter the original purport of the Clause, but it deals with the point raised by my hon. Friend the Member for Langstone and, as I have said, we have in other respects taken the opportunity to make the subsection perfectly clear in its purpose.

Mr. Powell: In the temporary absence of my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens), I thank my hon. Friend the Financial Secretary for having put down this Amendment, which makes it absolutely clear that any losses or expenses can be allowed which would have been allowed if the business had continued.

Amendment agreed to

Sir E. Boyle: I beg to move, in page 30, line 2, to leave out "he" and to insert:
the person who carried on the trade, profession or vocation.
This is a drafting Amendment to subsection (4, b) to remedy a defect similar to that dealt with by the second limb of the Amendment to subsection (4, a) which we have just discussed. I do not think I need give the House any further explanation.

Amendment agreed to.

Sir H. d'Avigdor-Goldsmid: I beg to move, in page 30, line 19, after "sixty" to insert:
nor to sums received after that date being sums of which the value has been assessed to estate duty.


This Amendment is intended to avoid a situation which I mentioned in Committee and on which I have had correspondence with my right hon. and learned Friend the Attorney-General, namely, the case of a professional man who died when in partnership and on whose estate Estate Duty was paid on payments to be received after his death. Those payments now, under this Clause, have been caught for Income Tax.
I take the point that the original assessment for Estate Duty would probably have taken into account that such payments might be caught for Income Tax because that was the position ruling, as I understand it, until the Cheyney case this year. Since the Cheyney case, these payments have been made free of duty. Therefore, the Amendment would particularly bite on deaths occurring between the judgment in the Cheyney case and the presentation of the Bill when, presumably, assessment for Estate Duty would be made on payments which would, in the then state of the law for that relatively short period, be free of Income Tax. Now, they are caught for Income Tax, and I should be glad to hear a public assurance that people will not be caught in this way.

Sir E. Boyle: My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) has explained clearly the purpose of the Amendment, which is to cancel the Income Tax charge because for the future the Estate Duty valuation in the sort of case which we are considering will take account of Income Tax. We have considered this point carefully, but I think that to cancel the Income Tax charge in respect of all deaths before the coming into force of the Clause would be unjustifiably generous, because in most cases the Income Tax liability has been allowed for and there is no overcharge.
There is the further point to which my right hon. and learned Friend the Attorney-General drew attention—that such a provision would mean exempting copyright royalties, which might continue to come in for the next thirty or forty years. Apart from royalties and similar receipts, the Clause will be of very limited application, and it is likely to be exceptional for it to bite on anything but the recovery of a bad debt which had been

written off for tax purposes, and cases in which a debt written off as had can he seen to be good at the time of death are rare cases.
As the Amendment is worded, it does not limit the exemption to cases in which death occurred before 6th April, 1960, but in effect allows it in all cases, without time limit, where the value of post-cessation receipts has been assessed for Estate Duty, and it would effectively remove discontinuance through death from the ambit of Clause 31.
I understand the interest of my hon. Friends the Members for Walsall, South and Wolverhampton, West (Mr. Powell). We have had correspondence on this matter. I think that, as worded, the Amendment is too generous in relation to the Clause, and for that reason I am afraid that on this occasion I cannot make a speech which will please my hon. Friends as much as did the last which I made.

Mr. Powell: Before he sits down, will my hon. Friend make one point a little clearer? I understood him to say that in most cases Estate Duty would have been assessed on the basis that tax would be payable on the receipts. Are there cases since the Cheyney case in which Estate Duty has been assessed on the higher basis, that is, on the assumption that the tax would not be payable on these receipts, because at present in such an instance there would, in effect, be a double charge?

Sir E. Boyle: I cannot answer that question off-hand. I take the importance of the point and I will look into it and give my hon. Friend an answer. This is a matter which we shall take into account when administering the Clause.

Sir H. d'Avigdor-Goldsmid: In view of the assurance which we have had from my hon. Friend and because we have served a useful purpose in ventilating the Government's views on this matter, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 32.—(SUPPLEMENTARY PROVISIONS AS TO TAX UNDER S. 31.)

Sir Hugh Lucas-Tooth: I beg to move, in page 30, line 22, after "individual", to insert:
or the widow or widower of an individual".


This Amendment should be discussed with the Amendment in line 26, after "he", to insert:
or in the case of a widow or widower her or his deceased spouse".
These Amendments seek to give the widow of an individual who becomes liable for tax under Clause 31 the benefit of earned income allowance after her husband's death, with similar provisions for a widower. If an employer pays a pension to the widow of a deceased employee, that pension is treated as earned income. That is not done on principle but by special statutory provision. No such provision was made in favour of the widows of self-employed people. I do not know what the reason was. I imagine that it was partly technical, because there was no employer, and partly also, no doubt, because of the somewhat advantageous position of the self-employed person which is being corrected by Clause 31. But now that the law is being altered by Clause 31, it seems fair to consider all the supplementary provisions which follow from it.
Subsection (1) of Clause 32 gives the individual earned income allowance on any royalties or other payments received after his retirement, no doubt because such payments are analogous to a pension which would be eligible for earned income relief if he received a pension. It seems to me to be illogical and unfair not to make the parallel complete by giving similar relief to the widow after the taxpayer's death. That is the purpose of these Amendments.

Sir E. Boyle: My hon. Friend has raised quite an important point which we certainly considered when deciding what the final form of the Clause should be. I listened with attention to my hon. Friend, but I am not quite satisfied that the analogy with the pension really holds, because surely the pension which continues in favour of a widow after the pensioner's death really is a pretty special case in our national life. A pension is not, in the normal sense of the word, income derived from property. Furthermore, the destination of continuing pension benefit will have been laid down by the very terms of the pension scheme itself, whereas copyrights, with which we are dealing in the Clause, are assets like any other form of property which can give rise to a regular investment income.
Whereas the ultimate destination of a continuing pension is something laid down in the pension scheme itself, the author can bequeath a copyright, like any other asset, just as he pleases. If the copyright goes to the widow, she receives it as property. The royalty income which it produces, I should have thought, lacks the character of earned income in such event. It is like leaving any other piece of property.
We have considered this point, but, in my view, to say that we should go as far as this Amendment and as far as my hon. Friend has gone would be unwise in view of the general purposes of this Clause. I think that we must take the line in relation to the Clause that earned income relief is, in general, confined to income from a source which yields income as a direct result of the personal exertion of the person receiving the income. Just how great the personal exertion may be in each case is a matter of argument. It is a general principle and we are bound to stand on it.
Once the source of earned income has come to a end, then that consideration does not any longer arise, and it would not be possible to accept the Amendment without introducing a principle which, I think, would be rather far reaching and which I believe we should be in error in accepting. That is why, while I see the force of my hon. Friend's appeal, I do not think that I can advise the House to accept the Amendment.

Sir H. Lucas-Tooth: While I fully appreciate the force of my hon. Friend's argument, it still seems to me that the widow of a self-employed person is at a disadvantage in comparison with the widow of an employed person. I do not wish to press the Amendment, because I appreciate the force of the argument against it, but I hope that my hon. Friend, in considering it, will "well do it" between now and the next Finance Bill. He may consider that it may be possible to do something on behalf of these widows. In the circumstances, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

11.45 p.m.

Sir E. Boyle: I beg to move, in page 30, line 28, at end to insert:
(2) Where any sum or sums chargeable to tax by virtue of the said section thirty-one


are received, in any year of assessment beginning not later than six years after the discontinuance of the trade, profession or vocation, by the person by whom it was carried on before the discontinuance, that person may, by notice in writing sent to the surveyor within twelve months after the end of that year of assessment, elect that the tax chargeable by virtue of that section shall, in lieu of being charged for that year of assessment, be charged for the year in which the discontinuance took place; and in any such case an additional assessment shall (notwithstanding anything in section forty-seven of the Act of 1952) be made upon him for the last-mentioned year in the amount on which he is chargeable under the said section thirty-one in respect of that sum or in respect of all those sums, as the case may be, and in connection with that assessment no further deduction or relief shall be made or given in respect of any loss or allowance deducted in pursuance of subsection (4) of the said section thirty-one.
This is a long Amendment but a relatively short point. It simply introduces a new subsection to Clause 32 in order to give a taxpayer, who gets in post-cessation receipts of his business in a year beginning not later than six years after its discontinuance, the option to be charged by way of additional assessment for the last year of business instead of for the year in which he gets the receipts.
This suggestion has been made to us by the Institute of Chartered Accountants. The cases in which the suggested option would operate are likely to be pretty rare. It seems to my right hon. Friend, in view of the representations made, that this suggestion is a perfectly reasonable one. The rather complicated wording of this Amendment is due to the working-out of the scheme behind it which I have indicated to the House.

Mr. Millan: I have one small point to raise. It is in connection with the words which appear at the end of this Amendment, which says:
… no further deduction or relief shall be made or given in respect of any loss or allowance deducted in pursuance of subsection (4) of the said section thirty-one.
In subsection (4) of Clause 31 we find that "loss" comes under subparagraph (a) and "allowance" comes under subparagraph (b). There are also mentioned the words "expense or debit". I would have thought that this Amendment would say that no further deductions or relief would be given in respect of "any loss, debit, expense or allowance." Is there a reason why the

Amendment refers only to "loss or allowance" and does not include "expense or debit"? It is not clear why there should be a distinction here.

Mr. Diamond: It would be churlish of me not to say how much we appreciate that the Government have shown their willingness to receive representations from the Institute of Chartered Accountants. If the Institute—as it may—renews its representations that cases I and II of Schedule D should be treated on a current year basis for companies instead of a previous year basis, are the Government likely to lend a sympathetic ear?

Sir H. d'Avigdor-Goldsmid: The theory, if it existed, that only chartered accountants can get Amendments accepted would be wrong, but in thanking my hon. Friend for this Amendment, which gives an option to the taxpayers—it is not often we can do that in this Chamber—may I draw his attention to the fact that this point was raised first on the Committee stage by my hon. Friend the Member for Wolverhampton South-West (Mr. Powell). His point has, to some extent, been met here.

Sir E. Boyle: Having taken advice, I can assure the hon. Member for Glasgow, Craigton (Mr. Millan) that his point, on this occasion, is somewhat misconceived, because the expenses can only, as I understand it, be claimed after the assessment. I believe that this Amendment will do what we want it to do.

Amendment agreed to.

Clause 37.—(EXEMPTIONS AND RELIEFS IN RESPECT OF TAX UNDER S. 36.)

Sir E. Boyle: I beg to move, in page 35, line 22 to leave out "either" and to insert "any".

Mr. Speaker: I imagine that it will also be convenient to discuss the Amendment in page 35, line 41 at the end to insert:
or
(c) in the case of a payment in respect of an office or employment in which the holder's service included foreign service, not being a payment of compensation for loss of office, that the foreign service comprised either—

(i) in any case, three-quarters of the whole period of service down to the relevant date; or
(ii) where the period of service down to the relevant date exceeded ten years, the whole of the last ten years; or


(iii) where the period of service down to the relevant date exceeded twenty years, one-half of that period, including any ten of the last twenty years".

Sir E. Boyle: If you will allow, Mr. Speaker, perhaps we could also take the next two Amendments, in page 36, line 41 to leave out "and", and in line 42 after "office" to insert "and' foreign service'".

Mr. Speaker: If the House so pleases.

Sir E. Boyle: These Amendments give effect to the intention of an Amendment which was moved in Committee by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), that is, to extend the relief which is given on a voluntary payment, as distinct from a payment of compensation for loss of office, in cases where part of an employee's service has been outside the United Kingdom.
I indicated to the Committee when my hon. Friend raised the point that it was the Government's intention to accept the principle of my hon. Friend's Amendment, and these four Amendments give effect to what we said we would do.

Mr. Millan: I am very surprised and disappointed that the Government have made this further concession in these payments for compensation for loss of office, not even a payment for compensation for loss of office as defined by the appropriate Schedule. There is already a good deal in the Bill which provides concession to people who have been working overseas at some time or other. Clause 37 (2, a), for example, says that if at the relevant date, which is the date on which the event happens for which compensation is paid, the holder of an office or employment was domiciled outside the United Kingdom and was then employed by a company or firm also domiciled outside the United Kingdom, he is excluded from the provision for taxing compensation payments.
A second exclusion or concession is made in the Fourth Schedule in paragraph 6, in that in the calculation of the amount assessable for tax there is deducted proportionately the length of service which the holder of the office spends overseas, as compared with the total length of his service.
All of us have a great deal of sympathy with the person who serves over-

seas, because he has certain disadvantages, particularly if he loses his employment when he is serving overseas, as he probably has to come back to this country and has various settling-down expenses and so on. No one would wish to deal unsympathetically or ungenerously with people in that kind of position, but the provisions of the Clause exclude many of them and there are also the concessions made in paragraph 6 of the Fourth Schedule, so that there is already a good deal of relief for people of this kind. It seems unnecessary to have this further Amendment, particularly as expressed.
There are three categories of service which will allow people to be excluded. No one would seriously quarrel with the first, which covers people whose period of service down to the relevant date exceeds ten years, the whole of the last ten years' service having been spent abroad. We get on to doubtful ground with the second category and the third category is completely indefensible.
All that is required for the third category is that one-half of the period of service, including ten of the last twenty years of service, should have been spent overseas. It is possible for the last ten of the last twenty years to have been served overseas, but it is also possible for the first ten of that twenty years to have been spent overseas and the last ten in the United Kingdom. That is the theoretical position, and there must be many cases in which something approaching the last ten years' service will have been served in the United Kingdom.
In those circumstances it seems to me that there is no justice in treating the people concerned any differently from those who have carried out their service in the United Kingdom. Considering the concession already given in paragraph 6 of the Third Schedule, it seems completely unnecessary to make this provision, especially in regard to the third category.
I am very surprised that the Government have accepted the argument put forward by the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) in Committee. This is quite unjustifiable. We have already commented on the way in which the original intention of the Government to tax these compensation payments has been whittled down in one way or another, by excluding the first £5,000, and by introducing a standard


superannuation benefit. This is another concession, and I hope that my hon. Friends will press the Government on this point.

Mr. Diamond: I rise immediately to my hon. Friend's invitation to press the Government on this point, because they are on a bad point here. I take the view that there was no need for the Amendment—as did the Government, in the first place. It was only when the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) pressed the matter and put down an Amendment in Committee that the Government decided to give effect to it. Like my hon. Friend, I take the view that the Bill already provides quite a fair method of dealing with this matter, on the basis of the number of years served abroad. I want to underline the difference between subparagraphs (ii) and (iii) of paragraph (c). On sub-paragraph (ii), which one might be prepared to accept, the argument is that if the last ten years of the employment have been served abroad it is sufficient to say. "This man has been employed abroad," and to agree that if he receives a voluntary payment on retirement it is unfair and unjust to say that he should be liable for any kind of taxation on that payment.
But what happens in the case of subparagraph (iii)? The man could have served the last ten years of his twenty years' service in this country, in which case it would be natural to say that his service had been in this country. We do not go so far as to say that the whole amount should be treated for tax purposes, because there would be some proportion of relief in respect of the previous years served abroad, but if the ten years served abroad are to be definitive in themselves surely the same argument should apply here, and it is wrong to suggest that in a case where the last ten years are served in this country there should be a complete exclusion from taxation on the voluntary payment.
I hope the Government will agree to withdraw the third category of case; otherwise we cannot possibly regard them as being serious in dealing with this problem of the "golden handshake."

Sir H. d'Avigdor-Goldsmid: It would be improper if I were to rehearse the argument I used in proposing the Amendment in Committee, but I am a

little disappointed that the hon. Member for Gloucester (Mr. Diamond) and the hon. Member for Glasgow, Craigton (Mr. Millan) have lost that benevolence which they have shown throughout most of the stages of this Bill and should at this late stage express sentiments which are unfair to the people who will suffer if those sentiments prove infectious. The hon. Gentleman said that we had a good deal of sympathy for the class of people who benefit under this Bill. It seems a poor way of showing that sympathy if the hon. Gentleman is recommending the House to refuse an Amendment in their favour which the Government have admitted. I hope that the fact that it was I who proposed the Amendment will not be any bar to the Government sticking to it.

12 m.

Sir E. Boyle: By leave of the House, I should like to reply to the point made by the hon. Member for Glasgow, Craigton (Mr. Millan) and the hon. Member for Gloucester (Mr. Diamond). In view of their speeches, I am a little surprised that they did not put down an Amendment—which would have been in order—to leave out paragraph (iii)—

Mr. Millan: We should have been glad to have done so, except for the question of time, which is something about which we have complained before. As has been pointed out, there are 129 Amendments on the Notice Paper and I should think it was a long time before most hon. Members got to this part of the Amendments.

Mr. Diamond: I only got round to this one at a minute to midnight yesterday.

Sir E. Boyle: I can assure the hon. Gentlemen that these three criteria set down in the Amendment to line 41 are not simply arbitrary and just thought up in connection with this Amendment to this Clause. Having decided on the principle that there should be total exemption in some cases, the criteria we have adopted—I think this was the best course we could pursue—are the same criteria as those, in practice, adopted in dealing with pensions paid to non-resident pensioners by United Kingdom employers or superannuation funds. That practice is set out in paragraph 220 of the Report of the Millard


Tucker Committee on the Tax Treatment of Provisions for Retirement.
As I say, these three criteria have some precedent behind them. While I understand that it is a matter for judgment, and one on which hon. Members may take differing views, about exactly what the criteria should be, I do not see how we could have done better than take those which are in practice adopted in dealing with pensions paid to non-resident pensioners by United Kingdom employers or superannuation funds.

Mr. Millan: Surely the point is that these are not payments to non-resident pensioners. The payments under this Amendment are those covered by Clause 36 and may often be payments to people in this country. The thing is entirely different.

Sir E. Boyle: I still think that having decided in principle that there should be some complete exemptions here, we went to what I feel to be a reasonable source in deciding what the criteria for these exemptions should be.
I cannot help feeling that the hon. Member for Craigton is making heavy weather of this. It seems to me beyond question that the principle behind these Amendments is right. I did not detect much disagreement earlier when my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) raised the point. I can see that there will be a difference of view about whether we have these Amendments right, or whether one criterion is too strict or too lax, but in general I am sure that the principle is right and I do not think that the Government will be doing any injustice to anybody if the House agrees to accept the Amendments as drafted.

Mr. Mitchison: I agree with my hon. Friends that the Amendments put down by the Government did not give the Opposition sufficient time. This is one of the later ones and, as we have heard, many of the previous ones are highly complicated. In those circumstances, I do not think it lies in the mouth of the Government spokesman to suggest that their Amendments might or should have been amended. They made it very difficult for us.
What troubles me in this matter is that there are already two exceptions

under this subsection. One is in relation to the holders of an office or employment domiciled elsewhere than in the United Kingdom, and the second one is in the case of the payment of compensation for loss of office. This is complimentary to the latter one, to paragraph (b). This is in respect of the office or employment but not payment for compensation for loss.
I cannot quite see why on questions of residence and the degree of foreignness—if I may put it that way—in an office or employment there should be this very remarkable distinction. Where it is a question of payment of compensation for loss of office the first condition is that the office or employment must be one which did not require work in the United Kingdom, or, if there was no express requirement as to the place of performance, that the holder did not perform any of his duties in the United Kingdom during the three years immediately preceding the relevant date. When we come to this other type of payment, an entirely different criterion is adopted.
I should have thought that these two payments, compensation for loss of office and payment in respect of the office or employment, were at any rate sufficiently close to call for some similarity between the conditions in which they were excepted and the conditions under which they were not. If we have totally different provisions we shall invite people to get round the provisions by making what is really compensation for loss of office into what is in form and apparently payment in respect of office or employment.
There is not that amount of difference between compensation for losing an office and a pension on its termination, and the two could easily blend into one another. I wonder if the hon. Gentleman, with the leave of the House, if the House gives it, could explain why he has used such different criteria in these cases. We all have a great deal of sympathy with this kind of case, but on the other hand, we feel that the "golden handshake" provisions as a whole were overdue and we regard with some critical attention any attempt to broaden the exceptions to these provisions.

Sir E. Boyle: I speak again by leave of the House. I regret that I cannot add very much to what I have said. I have


explained why we have adopted these particular criteria and whence we derive them. In our view, in considering the criteria that were desirable for this Amendment, we went to the best source we could. On that I realise that there is a difference of view in the House, but it is my belief that this Amendment—the principal one of this group—is justified on its merits. I cannot feel that we are seriously watering down the principle of the Clause by proposing this Amendment to the House.

Amendment agreed to.

Further Amendments made: In page 35, line 41, at end insert:
or
(c) in the case of a payment in respect of an office or employment in which the holder's service included foreign service, not being a payment of compensation for loss of office, that the foreign service comprised either—

(i) in any case, three-quarters of the whole period of service down to the relevant date; or
(ii) where the period of service down to the relevant date exceeded ten years, the whole of the last ten years; or
(iii) where the period of service down to the relevant date exceeded twenty years, one-half of that period, including any ten of the last twenty years".

In page 36, line 41, leave out "and".

In line 42, after "office'", insert "and' foreign service'".—[Sir E. Boyle.]

Clause 43.—(NOTICE OF LIABILITY TO TAX.)

The Solicitor-General: I beg to move, in page 41, line 35 to leave out "without reasonable excuse".
This Amendment goes with the following Amendments, which perhaps, Mr. Deputy-Speaker, you will allow me to refer to together in page 42, lines 1 and 5; page 43, line 3; page 50, lines 32 and 42; page 77, lines 5 and 32.
These Amendments are designed to remove a flaw which, on closer scrutiny, has become apparent in Clause 44 (1). The operative words of the subsection are:
Where any person … has been required, by a notice … to deliver any return … and he fails, without reasonable excuse, to do so within the time limited by the notice … or such further time, if any, as may be allowed by the Commissioners or officer concerned … he shall be liable … to
the penalties there set out. 
Let us take the case where there has been no extension of time and a failure with reasonable excuse to deliver the information or return within the time limited by the notice, which is generally 30 days, but no reasonable excuse for failure to deliver it thereafter. It is arguable that in such a case the person is not liable to any penalty at all, and, indeed, it would be very difficult to counter such an argument. There must, of course, be many cases where a taxpayer has a reasonable excuse for not making his return within 30 days, and the provision should certainly not give permanent immunity from proceedings. Therefore, it was essential to correct that flaw.
The primary Amendments are those in page 42, line 1 and line 5 and page 50, line 42. The first two consist essentially in leaving out the words "without reasonable excuse" in two places in Clause 44 (1), and the third replaces them by an expanded provision which does not contain the flaw to which I drew attention.
With regard to the Amendment in page 43, line 3, to leave out from "commenced" to the end of line 6, those words are now unnecessary in view of the new subsection (2) added to Clause 60 by the Amendment in page 50, line 42. I think I ought to make it plain that the omission of the words by the Amendment in page 43, line 3, does not take away any protection which the taxpayer has at the moment. Anything that is taken away is amply covered by the new subsection (2) to Clause 60. Equally, the new subsection (2) renders the words "without reasonable excuse" in Clause 43 (3) and the definition of "neglect" in Clause 60 (1) unnecessary, and they are dealt with in the Amendment in page 41, line 35, and the Amendment in page 50, line 32. The remaining Amendments are similar Amendments to the Profits Tax Schedule.

12.15 a.m.

Mr. Houghton: I confess that I had not discovered the flaw in the first few lines on page 42 of the Bill to which the hon. and learned Gentleman has referred. But has he not undertaken rather a comprehensive change in order to remedy that flaw? It is a new form of dealing with failure without reasonable excuse to separate the fault of failure


from the extenuating circumstance of "with reasonable excuse".
With the proposed Amendment, Clause 43 (3) will now read:
If any person fails to give a notice which he is required to give under this section he shall be liable to a penalty not exceeding one hundred pounds".
Clause 44 (1, b) with the proposed Amendment will read:
fails to furnish any information …
Then one must look elsewhere to discover what "failure" means.
I wonder if we have reached the stage when there are departmental versions of failure. The version in the Bill as it stands now is whether a person fails without reasonable excuse, but the version of the Ministry of Pensions and National Insurance in a recent Statutory Instrument is whether a person fails without reasonable cause. Ought we not to have a central authority on the question of failure and the excuses which can be given for it? It is a misfortune that the extenuating circumstance is separated from the operative word "failure". That is the only complaint I can make about it.
The Solicitor-General may say that that Amendment in page 50, line 42, puts the whole thing in intelligible form. It deals with the initial failure and with continued failure after time has been allowed by the authorities for compliance. To that extent it is certainly more satisfactory than the original form, though whether it was necessary to give the fuller explanation of "failure without reasonable excuse" is open to doubt.
Reading the authorities on this subject I find it very puzzling indeed, not being a lawyer, to know whether the word "failure" is necessary. Apparently "neglect" is enough. I understand that "neglect" connotes a state of mind of purposeful neglect of an instruction or an obligation or a statutory requirement. It also denotes failure without reasonable excuse. I have no doubt that, if one looked up the law in detail, one would find many authorities on this.
I wonder whether some of the changes made in the Bill have been imperative or whether a certain fastidiousness of draftsmanship has prevailed in the later stages. This seems to be one instance. Though I have no fundamental quarrel with what it is proposed to do, it is a

weakness in a Statute when the taxpayer reading it cannot see at once what is the extent of his culpability under a particular Clause but has to look elsewhere to find whether, knowing that he has failed to render a return, there is any excuse for it or any circumstances in which his failure may be condoned, or at least not made the subject of penalty.
I content myself with those observations at this late hour. We seem to have made a nightcap of penalties on several occasions whilst dealing with the Bill, and here we are again.

Amendment agreed to.

Clause 44.—(PENALTIES FOR FAILURE TO MAKE CERTAIN RETURNS, ETC.)

Amendments made: In page 42, line 1, leave out from "fails" to second "or" in line 4 and insert:
to comply with the notice or precept".
In page 42, line 5, leave out "without reasonable excuse".—[The Solicitor-General.]

The Solicitor-General: I beg to move, in page 42, in line 46, at the end to insert:
and in relation to a person's failure to deliver any other return or statement it does not include tax assessed in the name of a partnership on so much of the profits or gains assessed as falls to be included in the total income of any other person".
This Amendment reduces the higher penalty in Clause 44, subsection (2), on a member of a partnership who fails to render his personal return. Under the Bill as it stands, the whole of the partnership tax assessed after the end of the year following that in which the return form was served is included in the penalty. The Amendment will reduce the partnership tax to be taken into account to the tax appropriate to the partner's own share of the partnership profit.

Amendment agreed to.

Further Amendment made: In page 43, line 3, leave out from "commenced" to end of line 6.—[The Solicitor-General.]

Clause 45.—(PENALTY FOR FRAUDULENTLY MAKING INCORRECT RETURNS, ETC.)

The Solicitor-General: I beg to move, in page 43, line 16, at the end to insert: "or negligently".
This Amendment goes with Amendments 67, 68, 69, 70, 71, 72, 91, 92, 93,


and 94, and, with your permission, Mr. Speaker, I propose to discuss them together.
This series of Amendments arise from a point made by my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) during the Committee stage. He then raised the question of a taxpayer who made a return which contained both an error due to fraud and one which had an error due to negligence, suggesting that such a taxpayer might be liable to both the penalty of £50 plus twice the amount of the underpaid tax under the fraud provisions and a separate penalty of £50 plus once the amount of the underpaid tax under Clause 46 of the Bill, and my right hon. and learned Friend the Attorney-General promised to consider the matter.
I now tell the House that my right hon. and learned Friend has considered it together with the Chancellor, and I do not think it can be said that we can altogether dismiss the possibility which my hon. Friend the Member for Lang-stone suggested. The Amendments now before the House are designed, therefore, to obviate any possibility of such a construction being urged because it would obviously not be what the committee intended. The Amendments look much more extensive than they are. What has been done is in substance to run together the two Clauses relating to fraud and negligence.
The Clause will read like this:
(1) Where a person fraudulently or negligently—

(a) delivers any incorrect return …or
(b) makes an incorrect return … or
(c) submits to the surveyor or any Commissioners any incorrect accounts … he shall be liable to a penalty not exceeding the aggregate of—

(i) fifty pounds; and
(ii) the amount or, in the case of fraud, twice the amount of the difference specified in subsection (1) of section forty-seven of this Act.

(2) Where a person fraudulently or negligently furnishes, gives, produces or makes any incorrect information, certificate, document … he shall be liable to a penalty not exceeding two hundred and fifty pounds.
Then subsection (3) will read:
Where any such return, statement …
and so on as appears in Clause 46 (3).
Those Amendments, as I say, obviate any doubt on the point that my hon. Friend raised, and I think that from the point of view of drafting it makes a distinct improvement in the Bill.

Mr. Powell: I am obliged to my hon. and learned Friend for having met the anxiety which my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) expressed in Committee. It is a cautioning thought to remember that when my hon. Friend mentioned his fears and doubts in Committee the Attorney-General replied:
I do not see the least likelihood …" 
of this thing happening, and
I do not think there is the slightest possibility …
of the things which my hon. Friend apprehended. This illustrates the benefit of a locus penitentiae between the Committee and Report stages. However, I would like also to add that I feel sure that the attention to my hon. Friend's point has also resulted in much superior, neater and more convenient drafting of the whole part of this Bill.

Mr. Houghton: I am sorry that the hon. Member for Portsmouth, Langstone (Mr. Stevens) is not here to celebrate his several victories. I read in the newspaper this morning that when the Division bells rang last night he was found wandering in the precincts in his pyjamas. I do not know in what condition he would be if the Division bells rang now. [HON. MEMBERS: "Try it."]
I quarrel more strongly with the Solicitor-General over this Amendment than the previous one because I think this is a lot of rubbish. The hon. Member for Wolverhampton, South-West (Mr. Powell) has just referred to what the Attorney-General said in reply to the hon. Member for Langstone when he raised this matter earlier on 31st May. The Attorney-General said:
I certainly do not think that the consequences which he"—
that is, the hon. Member for Langstone—
suggests could arise. First, the offence under Clause 44 is of delivering fraudulently an incorrect return. A person does not become liable to a separate penalty for each incorrect entry in the return.
He went on a little later to say:
I should have thought that it would be very remarkable to find fraud accompanied by negligence in the same return.


Then, as the hon. Member for Wolverhampton, South-West has quoted, he said:
Again, it is a maximum penalty. I do not see the least likelihood of proceedings for negligence and fraud in relation to the same return, and consequently, I do not think that there is the slightest possibility of these penalty provisions being cumulative in respect of the same returns. I will certainly consider the point between now and the Report stage, but I think that there is no ground for my hon. Friend's fears."—[OFFICIAL. REPORT, 31st May, 1960; Vol. 624, c. 1244–5.]
12.30 a.m.
The promise to consider the matter before the Report stage is common form, especially between Ministers and their hon. Friends. It is usually a device to bring the discussion to an end and get on with other business, with which I do not quarrel in the least. Some of the promises are, perhaps, more seriously intended than others.
What I think is to be criticised is that in meeting this very remote possibility, according to the Attorney-General, the Chancellor has now altered, in my view, the rhythm of the structure of this part of the Bill. Certainly, he has put all the commentaries on the penalty Clauses of the Bill awry because all of them have referred to the convenience of the grouping—failure, fraudulently, negligently, and then aiding and abetting. In the Bill as it was drafted, Clause 44 dealt with failure, Clause 45 dealt with fraudulently, and Clause 46 dealt with negligently, and, although there was necessarily much repetition between Clauses 45 and 46, it set matters out separately and clearly, defining each offence in its own grouping. I thought that that was very convenient, and I am sure that the Chancellor and the original draftsman thought the same.
Now, we are asked to telescope Clauses 45 and 46, to combine fraudulently and negligently, and to provide for the alternative penalties for both within the same Clause. Under the Amendments proposed, the main part of the Clause is scrapped altogether. I think this is a pity. It was certainly more convenient and clear before, and, had it been necessary to guard against this remote possibility—this possibility of which there was so little likelihood—surely it could have been done by a proviso to that effect. I do not view with favour this part of the proposals

which the hon. and learned Gentleman has put before us. It is much too late at night to be vindictive about these matters and call upon my hon. Friends to show their displeasure in the usual way, but I hope that he has noted the strong comments I have felt it necessary to make.

Amendment agreed to.

Further Amendments made: In page 43, line 28, at beginning insert:
the amount or, in the case of fraud.

In line 30, after "fraudulently," insert or negligently."

In line 34, after "exceeding," insert:
two hundred and fifty pounds or, in the case of fraud."—[The Solicitor-General.]

Clause 46.—(PENALTY FOR NEGLIGENTLY MAKING INCORRECT RETURNS, ETC.)

Amendment made: In page 43, line 36, leave out from beginning to end of line 10 on page 44.—[The Solicitor-General.]

Clause 47.—(PROVISIONS SUPPLEMENTARY TO SECTIONS 45 AND 46.)

Amendments made: In page 44, line 21, leave out from "forty-five" to second "of" in line 22.

In line 37, leave out "sections forty-five and forty-six "and insert" section forty-five."—[The Solicitor-General.]

Clause 49.—(ASSISTING IN MAKING INCORRECT RETURN, ETC.)

Amendment made: In page 45, line 2, after second "any," insert "return."—[The Solicitor-General.]

Clause 60.—(INTERPRETATION OF PART III.)

Amendments made: In page 50, line 32, leave out "without reasonable excuse."

In page 50, line 42, at end insert:
(2) For the purposes of this Part of this Act, a person shall be deemed not to have failed to do anything required to be done within a limited time if he did it within such further time, if any, as the Commissioners or officer concerned may have allowed; and where a person had a reasonable excuse for not doing anything required to be done he shall be deemed not to have failed to do it if he did it without unreasonable delay after the excuse had ceased.—[The Solicitor-General.]

Clause 72.—(RELIEF FROM PURCHASE TAX ON IMPORTATION OF CERTAIN GOODS.)

Mr. Barber: I beg to move, in page 63, line 2, to leave out "to the Treasury"
This and the following Amendment are designed to give a measure of flexibility to the administrative machinery for granting relief from Purchase Tax which is provided for in the Clause. They enable the Commissioners of Customs and Excise, to whom Purchase Tax is payable, to accept applications for relief from Purchase Tax on behalf of the Treasury and similarly to accept the belated claims for relief in appropriate cases.

Mr. Houghton: It the Treasury are left out, may we have an assurance that they will be kept out not only in this connection but in many others, too? May I, on a point of order, point out that the word "Treasury" is not on line 2? Ought that to be rectified?

Mr. Jay: The words "to the" are in line 2 and the word "Treasury" is in line 3. Presumably the Amendment is nevertheless valid.

Mr. Barber: It is the usual way of doing it.

Mr. Deputy-Speaker (Major Sir William Anstruther-Gray): It has been moved in the normal form.

Amendment agreed to.

Further Amendment made: In page 63, line 11, leave out "Treasury" and insert "Commissioners".—[Mr. Barber.]

First Schedule.—(APPLICATION OF PART IX OF ACT OF 1952 TO SPIRITS CONSIGNMENT NOTES.)

Amendments made: In page 67, line 31, leave out "and"

In page 67, line 32, at end insert:
and in paragraph (e) after the word with there shall he inserted the words 'or in connection with'"—[Mr. Barber.]

Fourth Schedule.—(RELIEFS IN RESPECT OF TAX UNDER SECTION THIRTY-SIX.)

Sir E. Boyle: I beg to move, in page 72, line 15, to leave out "income tax chargeable under" and insert "tax chargeable by virtue of"
This should be considered with the Amendment in page 74, line 4, to leave out "amount of that tax" and insert 'tax chargeable by virtue of that section".
These Amendments implement a promise which I gave in Committee on an Amendment moved by my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) to make it clear that the reliefs in this Schedule apply, as is intended, to Surtax as well as to Income Tax.

Mr. Powell: It is in contemplating an Amendment of this sort that one realises what a fine thing it is to be a Parliamentary draftsman, for here in this subtle way is achieved the purpose which I have attempted to achieve by the blunt bludgeon of simply putting in the words" including Surtax" I am grateful to my hon. Friend for doing it and for doing it in this elegant fashion.

Sir E. Boyle: By leave of the House, I should like to say that at another time and at a different hour I shall be glad to explain to my hon. Friend how elegantly these Amendments perform the task which he had in mind.

Mr. Powell: Indeed, I understand.

Mr. Jay: However elegant it may be, it seems that as many words were necessary as in the Amendment of the hon. Member for Wolverhampton, South-West (Mr. Powell).

Amendment agreed to.

Sir E. Boyle: I beg to move, in page 72, line 22, after "charge" to insert "against".
This is a purely drafting Amendment. The word "against" was inadvertently omitted in the printing of the Bill.

Amendment agreed to.

Sir E. Boyle: I beg to move, in page 73, line 39, to leave out from "date" to the end of line 46.
I think that it might be for the convenience of the House to take Amendments 84 and 88 together. They are purely consequential on the Amendments which we discussed earlier to Clause 37.

Amendment agreed to.

Further Amendment made: In page 74, line 4, leave out "amount of that tax" and insert:
tax chargeable by virtue of that section".— [Sir E. Boyle.]

Sir E. Boyle: I beg to move, in page 74, line 24, at the end to insert:
8. Where the income of the holder or past holder of the office or employment for the year of assessment of which the payment is treated as income includes income, tax on which he is entitled to charge against any other person, or to deduct, retain or satisfy out of any payment which he is liable to make to any other person, the amounts referred to in sub-paragraphs (a) to (c) of paragraph 7 of this Schedule shall be calculated as if that tax were not chargeable in respect of that income.
This Amendment has a certain interest for two reasons. I was going to say that the first reason was that it is the first substantive Amendment to the Fourth Schedule without the advantage of the hon. Member for Glasgow, Craigton (Mr. Millan), but that is no longer true. It is interesting to note that it was a point raised in Committee by my hon. Friend the Member for Shipley Mr. Hirst). There is a case where that hon. Member and my right hon. Friend found themselves in close agreement.
The point is that paragraph 7 of the Fourth Schedule as drafted gives insufficient relief in certain types of case where a taxpayer makes a payment from which he is entitled to deduct tax. The type of case in which paragraph 7, as previously drafted, gives a wrong result is where the annual payment made by the taxpayer exceeds his ordinary income for the year, that is to say, his ordinary income apart from salary which is disregarded in giving relief. In such a case tax at the full Standard Rate might be charged several times on the part of the income used to make the annual payment.
The Amendment puts the matter right by providing that the computation of the relief under paragraph 7 is to be made on the basis of ignoring tax which is used to frank charges. The effect will be that the taxpayer who makes a payment from which he is entitled to deduct tax will be treated in the same way as the taxpayer who makes a similar payment but who is not entitled to deduct tax.
The Amendment actually provides that the computation of relief is to be made on the basis of ignoring tax which the taxpayer is entitled to deduct from someone else. I do not think that the Amendment can be said to widen the scope of the Schedule, but it certainly removes an injustice which would remain if we left it unamended.

Amendment agreed to.

12.45 a.m.

Sir E. Boyle: I beg to move, in page 74, in line 40, to leave out from "than" to end of line 41 and to insert:
one complete year, or exceeds an exact number of years, it shall be treated for the purposes of this paragraph as one complete year or as the next higher number of complete years, as the case may be".
This Amendment gives effect to the intentions of Amendments put down by my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) on the Committee stage but which were not discussed. Its effect is slightly to extend the "top-slicing" relief given under paragraph 7 of the Schedule. Where a payment represents compensation for loss of office, as the House is aware, a claim can be made—"top-slicing," as we say—by reference to the holder's number of years of unexpired service, defined in the Schedule as
… the number of complete years taken into account in calculating the amount of the payment, being years for which the holder of the office or employment would have been entitled …
to retain it.
If the period in question is two years and six months, the original intention of the Schedule was that the figure two would be taken for "top-slicing" purposes. The object of this Amendment is to round up rather than round down in these cases. In the example we are taking it would be three rather than two years. Where the period is just less than a complete number of years the Bill, in its original form, was somewhat ungenerous in taking only complete years into account. Although this matter is one of judgment, we felt it was a reasonable point to suggest that in these cases we should round up rather than round down, and that is the purpose of this Amendment.

Amendment agreed to.

Mr. Deputy-Speaker (Sir Gordon Touche): The next Amendment is in page 76, line 10. The Question is—

Mr. Diamond: On a point of order, Mr. Deputy-Speaker. I apologise for putting this to you, but do I understand that discussion on the Amendment to page 76, line 10, has been exhausted?

Mr. Deputy-Speaker: Yes, the hon. Gentleman is correct. The House was invited to discuss this Amendment with


a previous Amendment and it was agreed so to do. I call it now for decision.

Amendment made: In page 76, line 10, at end insert:
15. In this Schedule "foreign service", in relation to an office or employment, means service such that tax was not chargeable in respect of the emoluments of the office or employment—

(a) in the case of the year 1956–57 or any subsequent year, under Case I of Schedule E;
(b) in the case of any preceding year of assessment, under Schedule E.—[Sir E. Boyle.]

Fifth Schedule.—(PROVISIONS REFERRED TO IN SECTIONS FORTY-FOUR, FORTY- FIVE AND FORTY-SIX.)

Mr. Houghton: I beg to move, in page 76, line 22, column 3, at the end to insert Section 170 (2).

Mr. Deputy-Speaker: It might be convenient to discuss with this Amendment the other Amendment in the name of the hon. Member for Sowerby (Mr. Houghton), to the Seventh Schedule, in page 83, line 18, column 3, at end insert:
In section one hundred and seventy, in subsection (3) the words from "and if" to the end of the subsection.

Mr. Houghton: That would be convenient, Mr. Deputy-Speaker. It is consequential on the one I am moving. This is a relatively small point, but since we are doing a cleaning-up job we might as well do it as well as we can. Much earlier in our discussion of the Bill, through the courtesy of the Chancellor of the Exchequer, I had a list of all the penalties which it was proposed to leave unchanged. The one mentioned here was excluded from the new code of penalties into which the Chancellor rightly proposes to bring as many of the existing penalty Clauses as possible.
Section 170 (2) of the Income Tax Act, 1952, deals with certain returns which have to be made of interest not wholly paid out of taxed income, and there is a penalty prescribed in Section 170 (3) for failure to deliver an account of interest not wholly paid out of taxed income, the penalty being £100. That failure can properly be brought within the provisions of Clause 44 (1, b) and it would take its place, therefore, in column 3 of the Fifth Schedule. The penalty for failure under my proposals would be £50 for the initial failure plus

£10 a day on continued failure, subject to the provisions of the Clause regarding the authority for the imposition of a penalty.
This will bring into the new code of penalties something which should not be left out. Many others are being left out, but it would be out of order for me to pursue that matter now, although I hope that we shall not give up the quest for the elimination of all unnecessary stragglers throughout the Act which could be brought within the new code, or done away with altogether—some of them are survivals of almost a bygone age and can now be dispensed with completely. This clearly cannot be left out and should be brought into the new code. With others which are left out the penalties are very much heavier than anything prescribed in the new code, so clearly they must remain there.
I hope that this Amendment will be rewarded. It represents our work on and study of the penalty Clauses. Throughout our debates on the Bill I have gained only one point, and that was to double the penalty for failure to notify liability to Income Tax. That is nothing to be proud of and nothing to write home about, but still something. Bearing in mind the string of medals and trophies which hon. Members opposite have received in the course of these debates, I feel a bit deprived, a bit bereft, of proper reward for the work I have done. Here is an opportunity, in the last Amendment to be discussed, at the end of Report stage, after all our deliberations, for the Government to accept an Amendment from this side of the House. If it is accepted, I will count that as a great achievement.

The Solicitor-General: There are four reasons why this Amendment should be accepted. The first, referred to by the hon. Member for Sowerby (Mr. Houghton) as a reward which he expects for all the hard work he has done on the penalty Clauses. The second is that he feels his score should be doubled. The third is that he will feel himself otherwise a deprived person, and the fourth and perhaps most important is that his reasoning for including this penalty in the revised penalties in the Bill is quite conclusive. I therefore advise the House to accept the Amendment.

Amendment agreed to.

Sixth Schedule.—(APPLICATION OF PART III TO THE PROFITS TAX.)

Amendments made: In page 77, line 5, leave out from "and" to "he" in line 8 and insert:
fails to comply with the notice";.

In line 32, leave out from "commenced" to end of line 35.

In line 36, after "fraudulently" insert "or negligently".

In line 42, at beginning insert:
the amount or in the case of fraud".

In line 44, leave out from beginning to end of line 2 on page 78.

In page 78, line 10, leave out "paragraphs 4 and 5" and insert "paragraph 4".—[Mr. Amory.]

Seventh Schedule.—(ENACTMENTS REPEALED.)

Mr. Barber: I beg to move, in page 81, line 25, at the end to insert:

6 &amp; 7 Eliz. 2. c. 6
The Import Duties Act, 1958
In section six, in subsection (4), the words from "of Customs" to "Commissioners')".

This is the last Amendment that arises for discussion, and it is purely consequential

Amendment agreed to.

Further Amendment made: In page 83, line 18, column 3, at end insert:
In section one hundred and seventy, in subsection (3) the words from "and if" to the end of the subsection.—[Mr. Houghton.]

Bill to be read the Third time this day and to be printed. [Bill 133.]

ANTI-DUMPING (SODIUM CHLORATE)

12.57 a.m.

The Parliamentary Secretary to the Board of Trade (Mr. John Rodgers): I beg to move,
That the Anti-Dumping (No. 1) Order, 1960 (S.I., 1960, No. 959), dated 1st June, 1960, a copy of which was laid before this House on 8th June, be approved.
This Order imposes an anti-dumping duty of £19 per ton on sodium chlorate originating in the Soviet Zone of Germany. Sodium chlorate is mainly used as a weed-killer. The United Kingdom manufacturer applied to the Board of Trade last August for a duty under the Customs Duties (Dumping and Subsidies) Act, 1957. The Board followed its normal practice of satisfying itself that dumping was actually taking place, and that it was causing, or threatening, material injury to the United Kingdom industry. We made a public announcement last December—once we were satisfied that there was a prima facie case on both counts—inviting representations from interested parties. These representations were carefully considered, along with the evidence from our own investigations.
As a result, the Board reached the conclusion that there was dumping; that it was causing material injury to the United Kingdom manufacturers, and that an anti-dumping duty would be in the national interest. The Customs Duties (Dumping and Subsidies) Act defines dumping as selling at an export price below the fair market price in the country of origin. Ordinarily, the "fair market price" is taken as the selling price on the domestic market in the exporting country. In the present case, however, we had reason to believe that the price in the Soviet Zone of Germany was an arbitrary one. There is, moreover, no free rate of exchange for the East German currency by which the domestic price could be related to the export price, which is quoted in sterling by the East German exporter.
We have therefore used the power in Section 7 (3) of the Act, which allows the Board of Trade to determine the "fair market price" by reference to the price charged by the exporting country for sales in any other export maket. We


have obtained information about East German prices in several countries in Western Europe and elsewhere in the free world, and it is clear that sodium chlorate has been exported to the United Kingdom at prices substantially lower than those which the East German exporter has been charging elsewhere. We have established the margin of dumping by reference to a figure which seems fairly typical of the price in other markets.
So far as material injury is concerned we are satisfied that sodium chlorate from the Soviet Zone of Germany has been selling here at prices substantially below the United Kingdom manufacturer's costs of production, and that he has been forced to sell at a loss in order to avoid losing too big a share of the market. Even so, East German material has been gaining an increasing share of the market at the expense of the United Kingdom producer and of other traditional exporters to this country. We therefore considered that these imports from the Soviet Zone of Germany represented unfair competition and I hope that the House will agree that this Order is justified.

Question put and agreed to.

Resolved,
That the Anti-Dumping (No. 1) Order, 1960 (S.1., 1960, No. 959), dated 1st June, 1960, a copy of which was laid before this House on 8th June, be approved.

HARDWOOD AND SOFTWOOD (IMPORT)

1.2 a.m.

The Parliamentary Secretary to the Board of Trade (Mr. John Rodgers): I beg to move,
That the Monopolies and Restrictive Practices (Imported Hardwood and Softwood Timber) Order, 1960, a draft of which was laid before this House on 21st June, be approved.
The House will recall that the Board of Trade has power under the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948, to refer the supply of goods of any description to the Monopolies Commission for inquiry and report. In the exercise of that power, the Board, on 8th October, 1951, referred to the Commission for investigation and report the supply of imported hardwood, imported softwood and imported plywood timber.
On 23rd July, 1953, the Commission delivered its Report and in it objected to certain exclusive selling arrangements between importers and agents in these sections of the trade. By these arrangements importers in the softwood, hardwood and plywood sections undertook to buy only from agents on approved lists—there was a separate list for each section—and the agents, for their part, undertook to sell only to importers on similar lists.
The Commission found that traders excluded from the lists had little opportunity to deal in these main classes of timber and that the system tended to create an inflexible pattern of trade. It concluded that the agreements and undertakings operated against the public interest, that they should be abrogated and should not be replaced by other arrangements or undertakings having similar effects. As appears from the recitals to the proposed Order, an undertaking or assurance was given in March, 1954, that these recommendations would be carried into effect. That undertaking was given to the Ministry of Materials through the Timber Trade Federation, the principal association of agents, importers and merchants
.
Shortly thereafter the Board of Trade took over responsibility for the trade from the Ministry and an assurance was given to the Board that circulation by


the Timber Trade Federation of up-to-date lists of agents and importers did not conflict with these undertakings. However, between 1954 and 1956 several complaints were made by timber merchants and users that they could not place orders direct with agents but only through importers. As a result, a reference to the Commission was made by the Board under Section 12 of the Act, which enables the Monopolies Commission to investigate whether or not parties have complied with its recommendation.
This second reference was made on 13th February, 1957, and on 24th July, 1958, the Commission reported that the trade had in fact carried out their undertakings to abrogate their old agreements, but that the hardwood and softwood section of the trade had acted contrary to the second part of the recommendation in making fresh arrangements having a similar effect. On that Report, laid before the House on 31st July, 1958, the trade were approached and the Timber Trade Federation assured me that there had been a genuine misunderstanding by their members as to the purport of the recommendation in 1953 and so of their own undertakings, and this assurance I entirely accept.
The Board has accepted that report and, under the authority of its powers under Section 10 (1) of the 1948 Act, as having effect by Section 30 of the Restrictive Practices Act, 1956, has drafted the present Order, for which I now seek the approval of the House. The Order makes unlawful these exclusive selling agreements or arrangements with similar effects, relating to the supply of imported hardwood or imported softwood timber. The House will appreciate that imported plywood is not covered by the Order since the Commission found that that section of the trade had abrogated and not replaced the arrangements which were found in 1953 to be against the public interest.
The Order prevents two or more firms from agreeing or arranging to operate the kind of exclusive dealing arrangements to which the Commission objected. It does not, of course, prohibit the exercise of commercial judgment in deciding with whom business is conducted. The terms of the Order are brief. Article 2 (1) is the general provision making unlawful the making or carrying out of

agreements or arrangements having effects similar to those condemned. Article 2 (2) deals with agreements or arrangements already made and merely prohibits their carrying out.
The proviso protects such parts of these which would continue to be lawful if contained in a separate agreement. Article 3 is the usual provision exempting agreements between interconnected bodies corporate or partnerships. Enforcement would be by civil suit at the instance of the Board of Trade or other persons aggrieved. The House will be aware that the Order requires an affirmative Resolution of each House of Parliament to come into operation on 8th August, 1960, a convenient time at the end of the present Session.
Some may ask why there has been so much delay. The issue facing the Board was a complicated one. It could be resolved either by way of an Order or by some less formal method, such as further undertakings by the Trade. There were of necessity prolonged discussions with the trade and, as a result of these, we were able to satisfy ourselves that the best way to proceed was by way of an Order. A happy result of this is that the trade recognises the necessity for this step and that we can count on its co-operation. I am now firmly convinced that the Order will not be broken. It has been introduced to make the matter clear and to avoid further misunderstanding. Should, however, further complaint arise, the matter, if reported to the Board, will be looked into as to whether in our judgment it constitutes evidence of breach. Supposing it to do so, the Board would seek compliance with the Order by way of an injunction to preclude the offending agreement or arrangement being carried into effect under Section 11 of the 1948 Act. It is, of course, open to any person to bring civil proceedings for enforcement of the Order. I would wish, however, to reiterate that there is, and can be, nothing done to make any unwilling seller dispose of his goods where he does not desire to do so.
I hope the House will agree that we have taken the proper course in the light of the reports and recommendations of the Monopolies Commission and I ask it to approve the Order.

1.6 a.m.

Mr. Douglas Jay: I am sure the Board of Trade is quite


right to make this Order. Indeed, I congratulate this Government on having at last made an Order under the 1948 Monopolies Act. This is the first Order they have made in their nine years under the Act. I believe the Labour Government made one Order relating to dental goods in the short time it was possible to do so before the election in 1951. We have at last reached one Order introduced by the present Government, if I am correct.
The Parliamentary Secretary said that there might be some complaints of delay, but I did not think he gave a very effective answer to that objection. It is a little sobering to look at the time sequence which is ending tonight—or, to be strictly accurate, not until 8th August, 1960. I think the Parliamentary Secretary said the original reference of this industry to the Monopolies Commission was on 8th October, 1951. That is when it all started; a rather interesting date. The next thing that happened was that we had the first Report of the Monopolies Commission in July, 1953, nearly a year later, and in March, 1954, an undertaking was given by representatives of the industry to the Board of Trade. It subsequently transpired that this was not being carried out by certain people and a further report was made by the Commission in July, 1958. Tonight we are approving an Order to come into operation on 8th August, 1960. Even if we have reached the final right results and even though there may have been great difficulties and—as I entirely accept from the Parliamentary Secretary—prolonged discussions, this is a somewhat solemn and stately method of legislation and action. I hope it will not take quite so long on another occasion.
I was a little puzzled by what the Parliamentary Secretary called a proviso in paragraph 2. He purported to explain what this meant, but I think he more or less repeated the words in the Order, which says:
Provided that the said paragraph should not make it unlawful to carry out any provisions contained in such agreements or arrangements aforesaid, being provisions the carrying out of which would, if they were contained in a separate agreement or arrangement, not be unlawful under the paragraph.
Certainly at this time of night—it was the case even when I looked at it earlier—I am not entirely clear what the effect

of the proviso is and how far it makes things not unlawful—as it apparently does—which would otherwise have been unlawful under the Order. Perhaps the Parliamentary Secretary can help us a little further there.
We ought also to be clear about the relation of this Order to the general procedure now in force under the Restrictive Practices Act. We are now— this is the novelty of it—making an Order under the 1948 Act which originally set up the Monopolies Commission. Since then we have had the 1956 Act, which established the parallel and simultaneous, though entirely different, procedure by which certain arrangements and agreements—the same words as we have used here—of a restrictive character have to be registered with the Registrar and at the instance of the Registrar they have to go before the Restrictive Practices Court, and, as the last stage of that process, the Court can declare them to be illegal and make an order carrying out its decision
What I understand we are doing tonight is making an Order which will, in effect, say that any arrangements or agreements of this kind must not be made at all. We are going much further than if we said that we could say under the other Act that any agreements, if there are any, have to he registered and come before the Court. We are saying that no such arrangements or agreements can lawfully be made at all. But I take it that these arrangements and agreements that we are discussing are of such a character that, were it not for this Order, they would in any case have to be registered under the 1956 Act—that they are that type of arrangements and agreements.
I ask the Parliamentary Secretary this only in order that we may be clear how these two procedures relate to one another. Apart from that, as I have said, I think he is perfectly right to make the Order, and I only hope that if there is another case the process will not be quite so long drawn out as it has been this time.

Sir Harry Legge-Bourke: I imagine that the whole object of the Monopolies Commission was to ensure that the interests of the consumer were properly protected. The one thing that we have not been told—and it is a matter of some importance—is what effect the


Order is likely to have on the price to the eventual consumer.

1.12 a.m.

Mr. J. Rodgers: I am grateful to the right hon. Member for Battersea, North (Mr. Jay) for the welcome which he has given to the order.
To deal with his second point first, the drill now under the Order is that we should apply to the Court of Chancery for an injunction to prevent an arrangement or agreement which the Order specifies to be unlawful from being carried out. We should support this by a body of evidence which tended to show that such an arrangement or agreement had been arrived at. If the injunction were obtained and this practice still continued, we should apply for an order for committal for contempt of court, the evidence being similar to that in the previous application to the Court of Chancery.
On the first point about the proviso, as I called it, the exact words were:
The proviso protects such parts of these which would continue to be lawful if contained in a separate agreement.
That was the object. That refers to Article 2 (2) which dealt with agreements or arrangements which are already made and merely prevents their being carried out.
On the point made by my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke), I am afraid that I am not in a position to state what effect the Order might have on the price structure to the consumers, but I do not anticipate

that there will be any change here at all. I do not think that the price will go either up or down as a result of the order.

Mr. Jay: In order to help the hon. Member, would it not be reasonable to assume that the Order could not have the effect of making the price higher than it would otherwise have been? It is an Order which will prevent restrictions on competition. Can we not at least assume that the price cannot be higher as a result of the Order, even if not lower?

Sir Hendrie Oakshott: Before my hon. Friend replies, might I say, having had many years' experience in it, that the timber trade is about the most competitive trade that one could find in this country? Therefore, I cannot imagine that any arrangements like an Order of this sort would have the slightest effect on the price either way. The trade will still remain competitive whatever is done.

Mr. Rodgers: I agree with the right hon. Gentleman that certainly the Order will ensure that the price will not rise. One hopes that it will go down. I agree with my hon. Friend the Member for Bebington (Sir H. Oakshott) that there is great competition in the industry, and therefore the Order will probably not have much effect on prices.

Question put and agreed to.

Resolved,
That the Monopolies and Restrictive Practices (Imported Hardwood and Softwood Timber) Order, 1960, a draft of which was laid before this House on 21st June, be approved.

COASTAL RESORTS (LIFE- SAVING FLOATS)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Whitelaw.]

1.15 a.m.

Mr. John Cordle: In the short time at my disposal at this late hour, I want to ask the Minister to examine the possibilities of using a new method of saving life by providing beach or bathing floats around our coasts and inland waters. These floats can be seen in numbers of seaside resorts and are very simple in construction, namely, two ten-foot water-tight floats fixed together by supporting members or struts which provide a seat and footrest for the user. The means of propulsion is by a double-bladed hand paddle. I believe that these floats were first introduced in our resorts as long ago as 1930, becoming a popular pastime for holiday makers to hire at a small cost of 2s. a half-hour or so.
One of my constituents from Mudeford, a Mr. Kenneth Derham, a gallant and brave man who at this year's annual meeting of the Royal National Lifeboat Institution received the silver medal for rescuing two people off shore at Avonbeach, Mudeford, has brought to my attention this simple but practical means of saving life. During recent talks I have had with Mr. Derham I have gleaned from him that at Avon-beach over the last 25 years more than 50 people have been saved by him using these floats.
In Part I of the Medical Tables issued by the Stationery Office, the figures quoted by the Registrar of those who lost their lives by accidental drowning and submersion in this country in 1958 were 695 males and 220 females. In this respect it was recently stated in a Question in the House that in 1954 drowning was the third highest cause of loss of life in this country.
At this time of year when more and more people are going on holidays by the sea, this toll of life will increase unless better means are found of rescue. The leader in the Daily Express recently said:
Another 1,000 lives will be lost this year unless more people can swim".

Fundamentally that is the basic cause why so many lives are lost. If every child at our State schools were taught to swim and similarly taught life saving and artificial respiration, this problem would be greatly lessened. It is sad to think that the majority of our swimming pools are used as such only during the summer months and turned into dance halls in the winter. There must be more facilities for our children to learn to swim.
The beach float method of rescue commends itself simply because it is quick to put into the water, quick in the water, simple to use, and well suited to handle persons in the water. The great advantage in this respect is that the float is no doubt on the water line and it is comparatively easy to roll a person on to it. Furthermore, it can be used in almost any weather, and another of its commendable attributes is that anybody can use it.

Mr. Speaker: I do not want to interrupt the hon. Gentleman unnecessarily, but he must satisfy my ignorance about where the Ministerial responsibility lies in this. Perhaps the Minister can help me. I have to restrain his observations to something for which there is Ministerial responsibility.

The Joint Under-Secretary of State to the Home Department (Mr. David Renton): My hon. Friend was courteous enough to give me very full notice of what he was going to propose, and this matter touches upon the responsibility of several other Departments; but the reason why I am replying is that I understand he will make the suggestion that a responsibility should be placed on the police forces.

Mr. Speaker: Then we must see what happens.

Mr. Cordle: I was about to say, Mr. Speaker, that anyone can use the float. It is not necessary, in any sense of the word, to be an experienced seaman to be in control of the float. The maintenance of it is practically nil and it can be mass-produced in the shortest possible time at a very small cost. Perhaps I should say at this stage that I have no financial interest whatsoever in the production or manufacture of such a float.
When people who want to bathe in safety are not properly supervised, then


I say that those responsible are failing in their duty. Often the English trait shows itself when families find an out-of-the-way cove all to themselves and they put themselves out of the way of safety measures. Nothing can be done for them, but those who use the main beaches and who want to bathe in safety should, in my opinion, have more done for them. The seaside resorts want the visitor's money, and they should provide a measure of bathing safety.
We know that at vulnerable points the local authority provides a life-belt and a line; but is this enough? If beach floats were made available on all public beaches under the supervision of a lifeguard, the police, or a local authority, much would be done to save life. In this connection, it would greatly facilitate their use if a public telephone box was placed on each beach from where urgent messages could be sent, similar to those on the M.1 motorway. At the moment, experience has shown that when there is an emergency, often enough it has been many minutes before messages have been sent, and then by a private subscriber some distance away. When there is an emergency, in nine cases out of ten the public dial 999, and the chances are that if more telephones are provided many more lives might be saved.
In cases of small capsized sailing boats, the drifting offshore of rubber dinghies, tyres, and mattresses, and the like, beach floats would be a certain and speedy method of rescue. It is a tragic fact that 68 boys and 30 girls were drowned last year because insufficient facilities for rescue were available. A young married woman, two or three weeks ago was lying on an air mattress off the east coast when she was blown out to sea. Two hours later the mattress was found, but the woman was missing. Had a float been to hand a life would have been saved.
I should like to make the additional suggestion, which I believe to be a practical one, that the police forces and the local authorities should be equipped with these life-saving floats, which could easily be carried on the top of a vehicle or on a trailer attached to a car. In an emergency, it could be taken to the nearest point of the coast and paddled

out to the casualty. Numbers of people throughout the country are deeply concerned over the lack of inshore rescue facilities, and I hope that the Minister will investigate the matter even before the present holiday season is over.

1.16 a.m.

The Joint Under-Secretary of State for the Home Department (Mr. David Renton): My hon. Friend the Member for Bournemouth, East and Christchurch (Mr. Cordle), in his most valuable and well-informed speech, has made some constructive proposals which, as I pointed out earlier might be the case, touched upon the responsibilities of several Departments.
For example, the Minister of Housing and Local Government has certain responsibilities with regard to the powers possessed by local authorities in this matter. The Ministry of Transport is responsible for Her Majesty's Coast Guard, which functions primarily as a life-saving organisation, although with certain limitations which I shall mention. Then, so far as the use of telephones might be considered essential, perhaps the responsibility of the Postmaster-General might be engaged.
I am replying to this debate because my hon. Friend has suggested that the police forces have a part to play and, although my right hon. Friend the Home Secretary is not answerable in detail for what may be done by any particular police force, he is, as I understand it, answerable to the House for the powers which the police forces possess.
I endorse my hon. Friend's tribute to the chivalrous and successful life-saving efforts of his constituent, Mr. Derham of Mudeford. His work with the paddle boats is a shining example. We are grateful to my hon. Friend for drawing attention to this important and interesting subject, and we certainly share his anxiety about the loss of life by drowning. Notwithstanding the persuasive tone of his speech, I must, however—and I know this will disappoint him—firmly reject the suggestion that the police should undertake any general responsibility for the rescue of bathers, boaters or yachtsmen in difficulties.
The primary task of the police forces is to maintain and preserve law and order, to prevent and detect crime and


to keep our roads and streets clear for traffic. They carry out these vital duties under considerable difficulties today due to the crime wave, the ever-increasing numbers of vehicles on the roads and the shortage in the ranks of the police themselves. We ought not to add further duties which would distract the police from their main tasks.
So far as I have been able to trace, it has never before been suggested that the police have any general responsibility for life saving, and I am sure that it would not be right to place this new responsibility upon them now. It is doubtful whether, along with all their other duties, they could effectively discharge such a responsibility if it were placed or them. It is just not possible for them always to be on the spot soon enough whenever the need for a rescue may arise.
I am glad to point out, however, that the nature of police training is such that any officer who is on the spot is likely to be able to help when someone is in difficulties. Certainly they always do their best to do so; there are many instances of gallant behaviour by police officers, and I am sure the House would wish to pay a tribute to them. During their training, police officers are given opportunity to become efficient swimmers and life savers, and the keenness with which they train in first aid, including artificial respiration, is well known. Ability to swim or capacity for learning to swim is not a condition of recruitment to the police, but all policemen who can swim would certainly do what they could to save a man from drowning if they happened to be there or were able to get there.
Standing at this Box, I can answer only in a general way for my right hon. Friend's views as to the powers which the police forces have or should have, but perhaps I may mention that the local authorities have power under the Public Health Act to provide life-saving appliances where they think fit. Attention was drawn to this responsibility in a Question to my right hon. Friend the Minister of Housing and Local Government on 23rd June last year. In reply, the then Parliamentary Secretary to the Ministry said that he did not think that

there was a case for amending the powers of local authorities with regard to providing life-saving appliances, but he was sure that the authorities were well aware of their responsibilities.
Her Majesty's coast guards have an interest when boats capsize, and the coast guards are frequently called upon to use life-saving equipment provided for the rescue of ship-wrecked mariners, and they use that equipment to help bathers and others who are cut off by the tide on the cliffs or who otherwise find themselves in difficulties. The coast guards are able to call out the nearest lifeboat if there is a chance of its being able to help. The gallant services of lifeboat crews are well known, not only in attending big ships in distress but in rescuing people in the smallest craft, even children carried out to sea in dinghies.
Life saving at the seaside and on our rivers has traditionally been left to the care of local authorities and voluntary organisations, and they certainly do valuable work. The Royal Society for the Prevention of Accidents, the St. John Ambulance Brigade and the Royal Lifesaving, Society are at present conducting a water safety campaign, and this should be of great value in drawing the attention of the public to the need for commonsense safety precautions. In addition, for some time now the St. John Ambulance Brigade has been arranging what it calls a "Save the Life" week in various places throughout the country in which special emphasis is laid on the value of artificial respiration and first aid.
Finally, I want to emphasise, particularly with regard to children, that this is a family and individual responsibility. Like my hon. Friend, I speak as a father of young children who takes his children to the seaside every year. The fact that public authorities and voluntary organisations are doing useful work in this matter does not exempt the individual from taking reasonable precautions to safeguard not only his own life and his children's lives but also those lives which may be endangered if rescue has to be undertaken in difficult circumstances.
I hope that the publicity which may be given to this matter as a result of my hon. Friend's initiative tonight will help to prevent reckless and unnecessary hazarding of human life. He has made


various definite and constructive suggestions which could play a valuable part in saving life. I am sure that all concerned will study them carefully. We are grateful to my hon. Friend, and I propose to invite the attention of my colleagues in the other Departments concerned to what he has said in this

debate. The voluntary societies will, I am sure, be particularly glad to consider the paddle float and other methods of rescue to which my hon. Friend has so wisely drawn attention.

Question put and agreed to.

Adjourned accordingly at twenty-five minutes to Two o'clock.